When you are just starting out in business, it might make sense to run business transactions through a personal account and never think about the consequences it may cause down the road. You’ll pretty well know that it’s time to make that decision when it reaches a point where the number of business transactions is greater than the number of personal transactions.
Having a separate business account will make it easier for you to manage your business. You can collect receipts in the account, as well as write checks for expenses. That will be much easier to manage than if you’re attempting to do it all through a personal account.
There are many reasons why opening a business account is a better way to go:
Easier accounting
While separating your business and personal bank accounts could be a good way to make sure you don't miss out on tax deductions, it can also help to guard against mistakenly claiming for personal expenses. In the event of an audit or request for information down the track, it could also be useful to recall your transactions if you can refer back to your business bank accounts.
Keeping things clear cut is also likely to save you accounting fees while giving your accountant time to complete tasks that are more valuable to your business.
Lack of professionalism
If you have clients that you write checks to, writing a check using your name as opposed to your business signals that you're not a serious business venture. Even if your business is part-time and you work from your home, take your work seriously and your clients will too. Take the time to open a small business banking account to simplify your record-keeping and life.
When you want to begin accepting credit card payments
This might be the single biggest reason why you want a bank account for your business. Since the entire world trades with credit cards, you’ll have to begin accepting them as you expand your business.
You can’t accept credit cards through a personal bank account. It can only happen with a commercial account. Such accounts are set up specifically for the purpose of accepting cards. They can make the credit card process seamless, and that’s exactly what you’ll need.
Ease of management and tax simplification
Having a separate business account will help you be able to collect receipts in the account, as well as write checks for expenses. That makes it much easier to manage, rather than doing it all through your personal account.
Come tax time, your accountant is going to be happy that they don’t have to dig through a personal account to determine what is personal and what is business either. The longer it takes the accountant to figure it out the higher your bill is going to be. Additionally, you don’t run the risk of business expenses being missed that could have been deducted.
You may have to get finance
As your business grows you may find you have to open a business account in order to get finance and further expand. If this is the case, separating your personal and business accounts now could save you a lot of work having to do it later on and help you to easily demonstrate to the lender your business full financial records.
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