Local First Arizona member Carter Law Firm recently published a blog post on how to start a business in Arizona. It’s worth a read if you’re thinking about heading down that road, or even if you’re a veteran business owner and want to make sure you don’t have any legal loose ends.
She was then asked if it was appropriate to have a business PayPal account set up to accept business payments that is connected to a personal bank account. According to Carter, this is not a sound business strategy:
“One of the benefits of creating a business entity is it limits your liability. If you have a corporation or an LLC and the business gets sued and loses, the prevailing party can only take the business’ assets if the business is set up properly. They can’t go after your personal home, car, bank accounts, or other possessions.
You get this protection by keeping the business assets and your personal assets separate. Your business needs its own bank account, credit card, etc. You should pay for business expenses with the business accounts and personal expenses with your personal accounts. If you don’t keep your accounts separate and you lose in a lawsuit, the prevailing party could make the argument that the business is not a separate entity but is merely an alter ego for you. If that happens they can take assets from the business and your personal property to collect their damages.”
Sounds like a scary situation, so make sure to separate your business and personal accounts to avoid having this happen to you!