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 day-to-day personal 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 further down the road. 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 it is indispensable to have a business account to manage your spending and money from your business activities. 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. It is an excellent deal because the money will keep flowing if your business is doing well, resulting in minimal fees. At minimal cost, you can handle 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, let alone 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 many other financial perks to lead your business to success eventually.
A business account will also facilitate auditing as you can provide a clear picture of your transactions, making auditing much more accessible for an auditor. And you certainly don’t want to anger an auditor.
Professionalism
A business account will reflect your professionalism when working with clients or seeking new partners. 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 are hugely competitive these days, and you will most likely not get a second chance with the same client twice. Therefore, learning from others’ mistakes and doing it right the first time is always beneficial.
LLC, Partnership, or Corporation
A separate account is necessary if your registered company is an LLC, a Partnership, or a Corporation. Because more than one person is involved in owning 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
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 the overwhelming arguments supporting having a business account, it must be the first thing you do when starting an entrepreneurial venture. Your success depends on professionalism and staying out of trouble when times are tough.
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