Whether a person owns a billion-dollar business or works as a small-time freelance contractor, many business owners use the same account for personal and business, which is a mistake. Even though having more than one bank account can be inconvenient, a person should not use their personal account for business purposes, leading to legal liability.
According to business specialists, the first step towards a successful business is to open a business bank account. Cost is not a problem as most banks offer free business checking accounts, making it even easier for new business starters to open a separate account. Here are the reasons you should have a separate business account.
Legal Protection
Every time an owner sets up a corporation or a business, a primary advantage of doing so is the legal security from problems that come along with it. This is because the law looks at a business separately from the owner. Therefore, if a party wants to sue a company, they can’t sue the owner as an individual. However, in a financial association, a court can order an investigation regarding the owner.
Tax Benefits
Whatever the nature of a business, having separate accounts has many benefits, including tax benefits. It does not matter whether a person sets up a Corporation, an LLC, or a Partnership. Sustaining a proper yet separate bank account will help them avoid pointless difficulties that may occur for your business.
The IRS has specific regulations for working as freelancers or operating your business from home about what they can deduct as business expenses. If a person uses their personal account for their business, the IRS may audit those deductions, regardless of whether they are legit expenses or not.
Credibility
If you use your personal account to protect accounts payable, the suppliers or other entities you are making payments may question your business reputation. Using a separate bank account will make your business look more professional. A professional business account check will increase your credibility and legitimize you as a business.
Convenience
Having separate accounts and debit and credit cards specifically for your business will be convenient. You won’t have to calculate how to separate those expenses from your personal ones. Recording expenses can be daunting, especially for smaller businesses. When scrutinizing business expenses, having a credit card or bank statement exclusively for the business can prove to be beneficial. Using a card will also provide businesses with credit that won’t be an option with traditional banks.
These business credits and debit cards also offer many other benefits like travel discounts, higher credit limits, and a more streamlined billing process along with better interest rates. With that, many cards also give rewards like cashback on office supplies and other business expenses.
Processing Credit Card Payments for Business
Thanks to online shopping, customers rarely carry cash. So what does a person do when a customer shows up in your business with just a debit or credit card? Under these circumstances, a business account will be essential. A business account will make it possible to accept debit and credit cards connected to the account.
Accounting
Your business bookkeeping and accounting system need to be in place from day one of your business. If you don’t have your personal and business accounts separated, this can be an unnecessary challenge for your accountant or bookkeeper. If you are handling your accounting through accounting and bookkeeping software yourself, this can simplify the accounting process.
Conclusion
You should always have a separate business account, no matter the size of the business. Accounting and bookkeeping can be a challenge for any business, and as the business owner, you need to make the right choices on how to handle it.
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