Many business owners face the question of when it’s time to open a specific business bank account for their business. Some, however, continue to use their personal account and never think about the consequences it may cause down the road. There are many reasons why opening a business account is a better way to go.
1. Ease of Management and Tax Simplification
Who wants to nit-pick through hundreds of transactions in a month to figure out which are business, and which are personal? It’s easy to put them in the wrong bucket when you’re balancing accounts. Having a separate business account will help you be able to collect receipts in the account, as well as write checks for expenses. That makes it much easier to manage, rather than doing it all through your personal account.
Come tax time, your accountant is going to be happy that they don’t have to dig through a personal account to determine what is personal and what is business either. The longer it takes the accountant to figure it out the higher your bill is going to be. Additionally, you don’t run the risk of business expenses being missed that could have been deducted.
2. Personal and Legal Protection
Because you will potentially be using your business account for a large amount of transactions, there is the chance for fraudulent activity or identity theft to occur. Since you will be using your Employer ID Number (EIN) to open up your business account, you will be protecting your Social Security Number.
Additionally, if something happens and your business faces legal action while you are running your business with only your personal account, you could lose everything. Including your personal items. If the corporation or LLC that you have established gets sued, the party who is suing you is unable to sue you as an individual, which will keep your personal assets safe. In other words, business liabilities should stay with the business!
3. You Want to Build a Business Banking Relationship
Depending on what type of business you have, you may want to establish a relationship with a bank for future accounts you open that will handle different areas of your business. You also may want to utilize a bank for a future line of credit or a business credit card you need for expansion or equipment down the road.
4. You Want to Accept Credit Card Payments
Because so many people in today’s world prefer to pay with plastic, it only makes sense that it is a way you would want to accept payment from customers, as well. However, you can’t accept credit cards through a personal bank account! Specific commercial accounts are made for the sole purpose of accepting cards and will make the process seamless.
5. Gives Your Business Authenticity
While it helps to establish your business credentials for taxes, or looking to pay potential employees, it also helps to have a business account when you want the image of your business to be solid. Who wants to do business with you when you’re writing checks from a personal account? It makes you look like this is more of just a hobby rather than a full-fledged business. Your business name will appear on the check and everything will appear better established, which gives your clients and partners peace of mind.