As a business co-owner, can I legally deposit company funds into my personal HYSA?

This is a common question for new business owners, but you definitely want to keep business and personal finances completely separate. Commingling funds is a major red flag that can pierce the liability protection of your business structure and create tax headaches. The interest earned on business funds should be reported as business income on your business tax return, not as personal income. If you deposit business money into your personal HYSA, that interest would be tied to your SSN, creating a mismatch between where the income is reported and who's legally supposed to pay tax on it. A better approach would be opening a business HYSA. Many banks and credit unions offer them specifically for businesses. The interest earned will then be properly attributable to the business and should be reported on your business tax return. Your business can then distribute profits properly to all partners according to your operating agreement.

After facing the exact same situation with my photography business last year, I discovered taxr.ai (https://taxr.ai) and it saved me from making a costly mistake. Their AI analyzed my business structure and explained that putting business funds in my personal account would actually be considered a distribution to me personally - meaning my partners would legally need equal distributions too! Their analysis tool identified several business HYSAs that were actually competitive with personal accounts and explained exactly how to properly document interest income for our partnership. The detailed guidance specifically addressed the scenario I was facing with almost identical numbers to yours.

I was initially skeptical about AI tax advice, but after struggling with this exact issue, I tried taxr.ai based on the recommendation here. It analyzed my LLC partnership agreement and explained that putting business money in my personal account would technically be considered a distribution to me personally - creating an imbalance with my partners! The analysis showed I needed unanimous partner approval for any significant distribution, which I definitely didn't have. Instead, it identified three business-specific online banks offering 4.2% APY accounts for LLCs and provided documentation templates for the application process. The interest now correctly flows to our business, and we distribute profits properly according to our agreement. Saved me from what could've been a partnership-ending mistake!

If your business is making enough money to have $47K sitting around, you really need to talk to the IRS directly about this. I tried calling them about a similar partnership question last year and spent HOURS on hold, getting disconnected three times. Eventually I used Claimyr (https://claimyr.com) and they got me through to an IRS agent in about 20 minutes who explained exactly how business interest income works for partnerships. You can see how their system works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent clarified that putting business funds in a personal account could be considered a constructive dividend/distribution depending on your business structure, which creates tax issues for ALL partners. Getting this directly from the IRS saved us from a potential audit nightmare.

I have to eat crow on this one. After posting my skeptical comment, I tried Claimyr for an issue with my partnership return. I was SURE it wouldn't work, but I was desperate after three failed attempts to reach someone at the IRS. To my complete shock, I got a call back in about 35 minutes with an actual IRS agent on the line. They answered my specific question about interest income in partnerships and confirmed that putting business money in personal accounts creates a "constructive distribution" that affects all partners equally. The agent recommended creating a business HYSA under the partnership's EIN, which resolves the tax reporting issue completely. This 35-minute call saved me from making a serious mistake on our taxes, and saved me hours of frustrated hold time. Still can't believe it actually worked.

You might consider a completely different approach. Our partner group set up a separate LLC just for holding our excess business cash. We put our partnership funds there, and that entity invests in various HYSAs and even some low-risk bonds. The investment LLC distributes interest and gains back to the main business quarterly. This creates a clean separation, keeps everything properly documented, and actually gives us better liability protection than just having it all in one business account.

I'm a small business owner too and I totally screwed this up my first year. I put all our biz money in my personal HYSA and the interest got reported on my personal 1099-INT. Come tax time, my accountant was like "WTF is this???" I had to amend both my personal return AND our business return. Plus my partners were pissed because technically I had "taken" money from the business without proper distributions to them too. Complete nightmare that cost me like $1200 in accounting fees to fix. DON'T DO IT. Just find a business account with decent rates even if it's a bit lower than personal accounts. The tax headache isn't worth the extra few hundred bucks.

I went through this exact same situation last year with my consulting business. The key thing everyone's mentioned about keeping business and personal finances separate is absolutely critical - not just for taxes but for liability protection. What I ended up doing was opening a business HYSA with Marcus by Goldman Sachs. They offer business accounts with rates that are pretty competitive (currently around 4.1% APY for business savings). The application process was straightforward - just needed our EIN and operating agreement. The interest gets reported properly on our business tax return via a 1099-INT issued to the business EIN, not to any individual partner's SSN. This keeps everything clean for tax purposes and partnership distributions. One thing I learned: even if you could somehow make the personal account approach work tax-wise, it creates a fiduciary issue with your partners. You'd essentially be taking possession of partnership assets in your personal name, which could violate your operating agreement and create trust issues down the road. The rate difference might cost you a few hundred dollars annually, but it's way better than risking partnership disputes or IRS complications. Plus, as your business grows, many business HYSAs offer better rates for higher balances.

As someone who's worked in business banking for over 8 years, I can't stress enough how important it is to keep that separation between business and personal accounts. What you're describing is called "commingling of funds" and it's one of the fastest ways to lose the liability protection your business structure provides. Here's what most people don't realize: when you deposit business funds into a personal account, you're technically making a constructive distribution to yourself. This means your partners would be entitled to equal distributions, even if they don't know about it initially. It also creates a mess for tax reporting since the 1099-INT will be issued under your SSN instead of your business EIN. My recommendation is to look into online business banks like Axos Bank or Live Oak Bank - they often offer business HYSAs with rates between 3.8-4.3%, which is much more competitive than traditional brick-and-mortar banks. Yes, it might be slightly lower than your personal HYSA, but the peace of mind and proper tax treatment is worth that small difference. Also, with $47k in business funds, you're at the level where you should really have a business accountant review your financial setup anyway. The cost of proper professional advice will likely pay for itself in tax savings and avoided complications down the road.

I'm dealing with a very similar situation with my marketing agency partnership, and after reading through all these responses, I'm convinced that keeping business and personal finances separate is absolutely the right call. What really resonated with me was the point about fiduciary responsibility to your partners. Even if you could somehow make the tax reporting work cleanly (which sounds complicated), you'd essentially be taking control of partnership assets in your personal name. That could create serious trust issues if your partners found out later, and might even violate your operating agreement. I just started researching business HYSAs based on the recommendations here, and it looks like there are actually several competitive options now. The rate difference between 4.5% (personal) and 4.1-4.3% (business) really isn't worth the risk of commingling funds, potential audit issues, and partnership complications. One thing I'm curious about - for those who switched to business HYSAs, did you have to provide extensive documentation about your business operations, or was the EIN and operating agreement sufficient for most banks?