New Bank Account Question

[BetweenHikes]

I'm starting a new home business and will be opening a separate checking account for business transactions. My bank requires a minimum deposit for a business account to avoid monthly charges. If I seed this account from my personal funds with enough to cover the minimum plus some extra for initial expenses, how is this initial funding handled from an accounting perspective? Can I treat this initial balance like a zero balance. I don't want this to look like business income and be subject to taxes.

[Paul]

You can either book it as a loan to the business (eventually it can pay back) or as paid in capital (investment). In either case it doesn’t get mixed in as income when you do your accounting.

[Freelancier]

It's called "owners equity". When you take money back out, it's an owner's draw (or dividends, however the business is structured).

Really, though, your best bet would be to go visit with a small business accountant for a couple of hours and get all these kinds of questions answered as well as getting your books set up.

[BetweenHikes]

It's called "owners equity". When you take money back out, it's an owner's draw (or dividends, however the business is structured).

Really, though, your best bet would be to go visit with a small business accountant for a couple of hours and get all these kinds of questions answered as well as getting your books set up.


Thanks, Freelancer & Paul. This will just be a hobby business as a sole proprietorship. I'm reading everywhere how simple this is to do, but then questions like the one I posted come to mind. Yes, it's probably time to start a relationship with an accountant.

[TAAccounting]

I agree with FreeLancer, "Owner Equity" is better than logging it as a "Loan". As Loans require repayment and also 1099T.

Just avoid the hassles and log it as "Equity".

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[Jschultz]

It is either some sort of capital contribution or a loan.