If you run a small business, you may be tempted to use your existing personal bank account to pay your personal and business expenses, but don’t! Why?
For starters, the IRS requires every incorporated business to have a business bank account. Also, there are multiple perks and protections that any business can enjoy after opening a business bank account. Here are reasons why setting up a business account is a great idea.
Meets Your Bank’s Terms and Conditions
While you may not know this, there’s fine print on your personal bank account documents that indicate that your account should strictly be used for personal use. Any contrary use, such as regular direct debit or cash payments from customers, gives your bank the right to close your bank account.
Therefore, having a business bank account will adhere to your bank’s terms and conditions and prevent your personal bank account closure.
Improves Your Business Banking Relationship and Helps Build Your Credit Rating
Growing a business requires constant networking and financial support. However, to qualify for a business loan, you’ll need to have a positive credit rating. And what better way to build up your company’s credit rating than to open a separate business bank account? A business account will help establish good business financial habits and enable you to access business account benefits such as competitive interest rates on business profits and low-cost electronic transactions.
Safeguards Your Business and Personal Funds
It is important to separate your personal finances from your business finances. This protects you from a financial setback in case of a crisis in your business. For example, your personal assets won’t be at risk if your business can’t pay its debts.
Also, creating a business account gives you access to business services and products that are not available in a personal bank account.
Simplifies Your Business Administration
Creating a bank account for your business will help you monitor spending and track business expenses. Moreover, it will make it easy for you to manage your business budget more efficiently.
Additionally, separate business bank accounts make bookkeeping simple, clear, and accurate. This saves time and ensures all financial records are in order. It also makes your life and business easier to manage.
Simplifies Your Tax Returns
Having a business bank account helps separate your personal and business expenses. This ensures that your business transactions are not mixed with your personal transactions, making it easy to file taxes.
It also enables you to take advantage of business tax deductions. And if by any chance, the Internal Revenue Service (IRS) needs to investigate your business finances, your personal finances will not be at risk.
Having a dedicated business bank account under your company’s name where clients can directly make their payments makes your business appear professional. It also portrays your business as organized and established. This, in turn, instils confidence in your clients and brings more business.
While opening a business bank account may seem like a minor administrative issue, it has several short-term and long-term benefits. From saving you time to helping you manage your finances and grow your business, there are many advantages to having a business bank account. So, create one today and get on the right track!