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View Full Version : Bank Account: Individual or Corporate? [Kickstarter, USA]



Leggy Horse
11-27-2013, 01:55 AM
Hi everyone,

I'm preparing a Kickstarter project with my coworkers, but we've hit a snag setting up our bank account on the site.

We already have an individual bank account available to use, as well as a corporate account that should be ready in a week. (Both of these are with American banks, by the way.) We'd like to know which of these accounts would be better for us from a financial perspective, i.e. more cost-effective. I contacted Kickstarter, but they weren't able to answer my question.

If any of you could share your experiences in regards to the financial side of dealing with Kickstarter donations (or donations from Indiegogo or other crowdfunding sites), we'd really appreciate it!

admin
11-27-2013, 11:40 AM
I would expect there would be no difference in costs. Am I missing something? I would personally use the corporate account as ultimately you are a business, and when tax time comes around you will need to report as revenue the funding you receive from Kickstarter. It's a lot easier write off expenses if you set this up as a business, and thus use the business bank account.

Just my opinion if I am following what you are asking.

smartinvestor
11-27-2013, 11:55 AM
Agreed, keep your finances separate and distinct. As for being cost-effective, business bank accounts often have higher charges than personal accounts, but the best people to ask is the bank itself.

Leggy Horse
11-29-2013, 01:29 AM
Thanks to both of you for your advice. I don't have any prior business experience, so my question probably came off as a little odd. My co-workers were concerned mostly about the difference in tax rates. We've already applied for a business account, and it should be available for us to use very soon, but a couple people proposed starting the project earlier with an individual account so it could end before Christmas.

I'll talk this over with everyone else. Hopefully it won't be long before we come to an agreement.

MatthewJHanson
11-29-2013, 11:09 AM
Tax rates would have more to do with how your business is set up rather than the account you put it into.

Also keep in mind that if you get the money this year, you'll pay taxes on it this year, while many of the expenses you are likely to occur that would offset those taxes won't come into play until next year.

ShmoozBiz.com
11-29-2013, 12:15 PM
I would strongly suggest you speak to an accountant experienced in tax law. You should use a corporate account for multiple reasons. First question however, is, have you incorporated as a business? If so, you must open a corporate bank account, since any funds you receive belongs to the corporation. You can not place corporate funds in a personal account, if you do then it would be considered misappropriation of funds, which would look like theft.

A corporate account would also provide additional protection from individual liability should you have any financial issues along the way. The tax issues can be handled properly by an accountant with experience in prepaid sales and services, which are not booked as sales or income. Prepaid sales and services should be booked as a liability and moved into sales income only at time of delivery.

Find a good accountant to point you in the right direction. You could ask questions based on the info above to find out how much a accountant knows about the subject matter before you hire them.