1. Separate Bank Accounts
2. Advantages of Separate Bank Accounts
3. Umbrella Corporations
4. DBA
5. Businesses Required to Have Separate Bank Accounts
6. Having One Bank Account With Multiple DBAs

Updated October 20, 2020

Separate Bank Accounts

If you register your business under different legal names, it is best to also have a different bank account for each business name. This makes it easier to track income for each business.

Co-mingling accounts is not only risky because of the inability to properly track income, but it can also co-mingle the liability among each business. Because most business owners choose to open multiple DBAs to limit liability, this is defeating the entire purpose. Co-mingling funds can limit the ability to separate liabilities.

This does not apply to the act of separating different businesses under the same tax ID number. You do not need to have separate bank accounts unless you also have separate DBAs. Many banks do not even charge you to have separate bank accounts and doing so can make the accounting and tax process much easier.

Advantages of Separate Bank Accounts

In most cases, it makes sense for a business to open separate bank accounts with different DBAs. These are a few of the most common advantages:

  • Easier accounting process: You have two separate incomes and can plan accordingly.
  • Required: Many banks will require that separate businesses have different accounts.
  • More ability to evaluate the success of the business: When funds are separated, you can better identify profits, losses, and tax criteria.
  • Less liability: If you are sued or subpoenaed, it can be very tricky to manage with multiple DBA businesses on one bank account. Some states even have specific laws that require levies to use just the DBA bank name.

Umbrella Corporations

An umbrella company is a business that is created with the purpose of covering all the companies underneath it. If you have one umbrella corporation with many companies beneath it, it is possible to have one bank account that divides payment into the separate business groups.

DBA

A DBA is defined as a “doing business as” name. Registering a DBA means you are doing business in a name that is different from your own. Sole proprietorships and partnerships may choose to do business in their own name or in a DBA. A DBA is when the state allows you to operate under a different business name.

Before choosing a DBA name, it is important to check that it is available and that it does not violate anyone's patent or intellectual property rights. A DBA does not mean that a new business is formed. Instead, it just means that the same company is operating under the new name. Any business actions like selling stocks or selling the business cannot be conducted in the DBA name. These types of deals must include the legal name of the business.

Businesses Required to Have Separate Bank Accounts

Some businesses are required to have separate bank accounts. The following may require your business to have a separate account:

  • If your business is a separate legal entity
  • If you operate as an LLC or corporation

Businesses that are registered as a sole proprietorship or partnership are not required to have a DBA and thus, are also not required to have a separate bank account.

Having One Bank Account With Multiple DBAs

As long as it is not prohibited, you can legally have one bank account with multiple DBAs. Although it is generally not recommended, some business owners may find that it is the best decision for their setup. If you must have one bank account with multiple DBAs, keep the following tips in mind:

  • Place payment instructions and terms on the payment quote. Customers may be asked to recall their account number for better tracking purposes.
  • Create an organized sales ledger that carefully tracks the income of each DBA.
  • Keep detailed records in a cash book.

It is important to have a reliable bookkeeping process. If you are audited or sued, you will need to retrieve information in an organized way. Otherwise, it can get really messy, and you might be left paying more in taxes or liabilities than you would have with more than one bank account setup.

If you need help with multiple DBAs one bank account, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.