Some entrepreneurs believe they only need to bring in cash and put it into their personal accounts, but many entrepreneurs don’t know the benefits of having a business bank account. Whichever industry you choose, you’ll probably want to set up a business bank account as your company grows. It can make tax calculations easy while also helping you save money, avoid hassles and manage risks. Taking the time to set it up correctly at the beginning can allow you to prepare your business for future growth.
Check out these advantages of having a business bank account.
Separate Your Business and Personal Finances
Opening a business bank account can make it simpler for you to manage your business as it grows. By having a corporate account, you can separate your personal and business transactions, which makes it easier to keep accurate books and records. When you set up a business bank account, any client payments or sales revenues can go directly to your business account.
Limit Your Liability
While opening a business, many entrepreneurs choose to set up a limited liability company (LLC) or a corporation to limit their business’ liability. Having an LLC or a corporation separates your personal assets from business assets and keeps them safe. By separating your personal and business finances, you will be better protected from liabilities in the event of a lawsuit against your business.
Having a dedicated business bank account shows that you’re open for business and is especially important as you scale your operations. The fact that your business name appears on checks and other payment methods can give clients and customers the sense that you’re here to stay.
Monitor Business Progress
Opening a business bank account can let you manage your day-to-day business finances easily, so you can plan to improve and grow. The IRS (Internal Revenue System) outlines the requirements you must meet to indicate you are performing business activities, like maintaining complete and accurate books and records. Having a business bank account can help you meet those criteria, more easily allowing you to separate your personal income and expenses from those of your business.
Organize Your Business Records
When all of your business income and expenses are visible in the same account, it’s easier to keep track of which clients have paid you, where you spend more or less than expected and all processed payments so far. This can lead to much better recordkeeping for reference.
Increase Security of Your Bank Account
A business bank account will be even more effective if you establish an employer ID number (EIN). You can use this number for your bank account to handle the payment of income, sales or payroll taxes, increasing the security of your bank account. With a business account, if you want to enter a partnership, you won’t have to give a partner access to your personal bank account.
Accept Credit Cards and Other Payment Modes
Since most business owners use credit cards, you’ll have to begin accepting them as you expand your business. You can’t typically receive credit card payments with a personal bank account, so you should have a business bank account. Business bank accounts can accept credit cards as well as other payment methods and make the transaction process seamless.
Simplify Tax Preparation
A separate business bank account makes it easier to track your tax-deductible expenses and save time and money while filing your tax returns. When all of your business expenses are available in one place, you can be more efficient in calculating your taxes. These expenses may include advertising, buying business equipment, business travel, health insurance premiums, retirement plan contributions and more.
Having a business bank account can help you understand the tax amount you owe, the money you need to set aside for taxes and how to make necessary estimated tax payments throughout the year.
Help You Sell Your Business
Anyone willing to buy your business will check the history of your financial transactions, inspect your financial documents and review supporting bank statements. A bank statement represents a form of third-party verification of financial transactions. A business bank account enables you to provide the bank statements to a prospective buyer without disclosing personal information.
Build Business Credit History
Opening a business bank account can help you track your business’ transactions that you’ll need to show for a business loan or line of credit in the future. Many banks may also offer you a business credit card that can help you build a credit history for your business. Having a good credit history under your business’ name can help you qualify for loans with lower interest rates and more favorable payment terms.
Access Better Perks and Services
Having a bank account for business finances can provide you with certain perks and rewards as part of your overall business banking relationship. Some business accounts and credit cards may also offer special cash-back rewards or long repayment periods for your monthly bills to help you manage your spending. Some business banking advantages you may find include the following:
- You may get a good deal on processing credit card payments.
- You’ll gain access to cash management services to help you manage payments more efficiently.
- Some banks can help you implement strategies for getting paid faster and improving financial performance.