When you decide to start your own business, it might seem a pain and not important to figure out how you will manage your business accounting and deposits if you are beginning a small company. The reason you decided to begin your own business was to create a cash flow. This makes all business transactions very important to your success. Just as important as it is to stay on top of all of your business transactions, it is equally important to keep your business and personal transactions separate.
3 Main Reasons to Use a Business Bank Account Instead of a Personal Bank Account
1. Keep your business transactions seperate
Your business transactions need to be recorded correctly so that you can access them later on down the road. You may need them for performing accounting graphs and analysis and you will also need to access them for tax preparation. It will make tax time much less stressful by having your business transactions separate and organized.
Another advantage to keeping your business transactions separate is that if you decide to outsource your bookkeeping later on down the road, then you will have a lot easier time with the transferring of the job. If you do not have your transactions separated, you will spend more time explaining things, looking for things, and then doing what needed to be done. Of course, this can result in higher fees on top of numerous questions from others that you normally wouldn’t have to deal with.
As I mentioned above, your business transactions will be needed for tax preparations. If you do not have a clear view of what is a legitimate business related expense, you could face higher tax penalties. You can stop this from happening by just keeping yourself organized and separated.
Many new business owners start to see all the start up costs that their new business will stack up. This is true with your business bank account as well. Many banks will charge fees associated to your business bank account. This does not mean that all banks will do this. You can still find a lot of banking establishments that offer your free banking. Checking around to different banks can make a big difference in the amount you are charged on your bank account for transactions and monthly fees. It is important to keep in mind that even though a bank says that they offer free business bank accounts, there will usually be stipulations attached. Usually you will have to have so many of your total transactions done by a direct transfer.
Also, you are under no such obligation to open a business checking account with the same bank that holds your personal checking account. It might be of better benefit to you for you to open your business bank account with a completely different establishment. The bank that offers you great rates on your personal bank account might charge higher fees on a business bank account than another bank will. It just depends and as so you should check around to find the best deal.
3. Save Time
Many new business owners will still decide to use their personal bank account for business related expenses. This is not ideal as you can pay for something and forget to note that it was for a business item. It becomes very sticky when you mix your personal and business together. It is highly suggested to keep them separate. You will thank yourself in the long run for opening that separate business bank account. You have enough to worry about with the start up of your new business without having to worry about sorting through transactions at a later date.