A small business owner has a lot of things to do when they’re starting a new business. One thing that might not seem too important is starting a business checking account. After all, the person could just use their personal account, right?
Even though it may seem convenient to use a personal account for a small business, that’s typically not a good idea. Consider these important reasons for having a business checking account.
Separation of personal and business finances
One of the primary reasons to have a business checking account is to separate personal and business finances. A dedicated business account ensures that all business-related expenses and income are tracked separately. This separation is important because it shows the business is a distinct entity from the owner.
Simplified tax preparation
Separate accounts make it easier to identify deductible expenses and calculate taxable income. This helps prevent errors and omissions that could trigger audits or penalties from tax authorities. Additionally, having a dedicated account allows for more efficient record-keeping.
Professionalism and credibility
Clients, suppliers and other stakeholders often view businesses with dedicated accounts as more established and reliable. Using a business account to receive payments and pay expenses projects a professional image and builds trust with customers and partners. This can be particularly important when dealing with larger clients or applying for business loans and credit.
The business bank account is only one step a business owner can take to protect themselves and their business. Seeking assistance with each step of the process is beneficial.