Why You Need A Bank Account for Your Business
Top business owners advise the use of separate bank accounts for business purposes. To business gurus, it's one of the fundamental requirements for every business to run effectively and smoothly. If you are starting small, you may wonder if there is a need to create a bank account just for your business. The simple truth is that there are many reasons, be it legal or otherwise, that mandate a unique bank account for your business. Let's see a few.
1. You'll Obey Tax & IRS Requirements
When you incorporate a business, the internal revenue service expects such a business to have a bank account. A business bank account is mandatory for sole partnership, LLC, and any other form of incorporation. As soon as a business starts to receive and spend money, a bank account is necessary.
2. You'll Have Better Loan Approvals
As stated briefly initially, an account becomes important when a business begins to receive and send money. An online payment system (POS) through any channel requires a business to have an account.
To get business loans, a bank account is a necessity because money lending institutions won't grant a loan if a business has no account. Approved loans must be deposited in a business's bank account. If a business doesn't own one, it becomes impossible to collect the loan.
A business with an account instills more authority and thereby increases the chances of getting loan approval. Additionally, you won't have to use your credit score to get loans especially if it's bad. Besides, you may need a personal loan and a business loan at the same time. If you operate a business account, you can obtain a business loan without interfering with personal loan needs.
3. Get Accurate and Tidy Financial Records
A business' financial records must be kept accurate at all times. It helps to deal with taxes easily, track business transactions, take note of cash flow, and appropriately manage a business. If you use a personal account to also run your business, the chances of mixing up personal and business funds is high. And this often makes it difficult to audit properly and get an accurate picture of a company's financial situation.
4. Stay Safe During Any Lawsuits
Businesses registered as LLC, for the most part, protect owners. An LLC functions independently, ensuring business debts are not deducted from a personal account. An LLC operates as a different entity that exists separate from other private property belonging to a business owner. If a business account is joined with a personal, then you'll take the hit for your business.
5. You'll Have Easier Audits
A multiple-purpose account could be quite confusing and difficult to assess for a bookkeeper or an accountant. Extracting detailed financial information becomes tedious and even more daunting is a tax audit. During a tax audit, a review of your business account will lead to a mix-up that will prompt digging into your finances. This causes complications that could have been easily avoided and saves time.
6. Assess Your Growth
Business owners work hard to grow their enterprises. Assessing the growth of a business involves taking into account the profit/loss incurred by the business over a quarter / year. With a separate account, you can assess your business growth or spot a decline that requires taking strategic steps to adjust.
Opening a business account saves you from a lot of stress and time-consuming exercises. More to that, it's a legal requirement in most states which you must oblige to run a business. Remember that business loans are good options to consider when you decide to scale your business. Hence, have a separate account to enjoy easier loan approvals and other perks.
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