Whether youíre operating a startup or a company with decades of history, itís important to keep your businessí finances separate from your personal assets.
Simplify Your record-keeping
Business owners, especially those of small businesses, likely manage many facets of their companyís operations, including bookkeeping. They often find that having a separate business checking account can be extremely helpful in keeping business revenue and expenses organized and catalogued.
For one, it will make filing taxes for the business a lot easier and a lot less confusing. You can track expenses and revenue without having the extra headache of sorting through every transaction within the account to make sure it was for business, not personal, use. This will also help you to be able to substantiate expenses for your business should you be audited.
Also, the Internal Revenue Service (IRS) looks to make sure a business is actually what it says it is, and is not a ďhobbyĒ disguised as a business, adds a June 2016 article on TheBalance.com by contributor Rosemary Peavler.
Having a specific business checking account, with business-only credit cards and statements of business-only purchases and transactions, will help you prove your business as legitimate in the eyes of the federal government.
Moreover, ďif your business is incorporated, the IRS requires that you keep a separate business bank account. It doesn't matter if your business is a corporation or a partnership or an incorporated sole proprietorship. If you're incorporated, you must have a separate account,Ē reports Peavler.
Streamline your productivity
As your business grows, you may find you donít have the time or the ability to get all of the business banking done with regard to daily operations and needs.
ďIf the weight of making deposits, signing debit card receipts and mailing checks is becoming too heavy, a business checking account gives you the option to delegate some daily tasks to your trusted employees,Ē states David McMillin in an article for Bankrate.com.
Improve your possibility for growth
Unlike with personal checking accounts, business checking accounts allow for certain leniencies when it comes to requirements to help your business continue to thrive.
Many financial institutions will offer to waive the monthly minimum balance and instead may just require a certain amount of business credit card purchases from the account each month, says McMillin.
Furthermore, youíll set the stage for a strong business relationship with your banker, which will come in handy as your company grows and you look to borrow funds to expand. Lastly, having a specific business checking account can demonstrate the professionalism of your business to your vendors. If your payments are coming from your personal account, your business may seem less legitimate.
Having a specific business checking account is beneficial for a number of reasons; most importantly because it will help you to properly manage your business and increase your bottom line.