While initiating your entrepreneurial venture without needing a business account can be enticing, this might not be the shrewdest of decisions. With time, your business will grow, and it will become critical to differentiate your business and personal day-to-day finances.
Start-ups and part-time business holders often mix up their finances, and while it looks like an easy, practical, and cheap way to operate, it certainly won’t be the same later on. Any business operator must treat their business with due diligence, regardless of its scale. While setting up a separate bank account means additional bank fees and expenses, you will save yourself from inconvenience in the future.
Manageability
Many people who own businesses will attest that, to manage your spending and money from your business activities, it is indispensable to have a business account. Business accounts may appear to charge much more than regular, personal accounts. However, some banks only charge minimal fees if you deposit a certain amount of money regularly. This is an excellent deal because if your business is doing well, the money will keep flowing, resulting in minimal fees. At minimal cost, you can handle all of your start-up’s financial matters proficiently.
Legitimacy
Suppose things spiral downward, and you are stuck in a bad situation. In that case, it will be hard for you to explain the legitimacy of your business to any government institution or your partners if your finances don’t reflect that. Also, there are some other government fees that you will need to pay for running a business, and your business account is often checked for verification. You can only get away with it if you prove you are running your business as a hobby. Still, it is better to be safe than sorry.
Filing a Tax Return
Filing your tax return can be a nuisance in itself, let alone also suffering the exhaustion of going through your account statements and deciphering your business-related transactions. For a start-up, filing seamless returns in the first few years can provide your business with a solid credit history. When your credit report is unblemished, you can apply for loans, business credit cards, and other financial perks that can eventually lead your business to success.
A business account will also facilitate auditing as you will be able to provide a clear picture of all of your transactions, making the job of an auditor much easier. And you certainly don’t want to anger an auditor!
Professionalism
When working with clients or seeking new partners, a business account will reflect your professionalism. No one will take you seriously if you get into a business deal with them through your account. It would help to treat your start-up like a real business before expecting others to do the same. Business environments these days are hugely competitive, and you will most likely not get a second chance with the same client twice. Therefore, it is always beneficial to learn from the mistakes of others and do it right the first time.
LLC, Partnership, or Corporation
Having a separate account is a must if your registered company is an LLC, Partnership, or Corporation. Because more than one person owns such a business, there can’t be an exclusive account for it due to legalities. An account in the business name gives all partners equal authority over managing the account, ensuring that everything runs smoothly.
Protection
Many experts call for a business account for a start-up from the beginning, as this protects you and your business. An account in your business name provides you with asset protection and corporate veil protection. There will be a lesser chance of having an issue with the IRS, and you will sail smoothly through any financial troubles.
Conclusion
With all of the overwhelming arguments supporting having a business account, it must be the first thing you do when starting an entrepreneurial venture. Your personal and business success highly depend on your professionalism and ability to stay out of trouble when times are tough.
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