One piece of advice you will probably receive when you start up a business is to sign up for a business bank account ASAP. You might be wondering why you should do this or even if you’re required to do this. The answer is not merely a simple yes or no because there are so many factors based on the kind of business you run, how large it is, what it’s registered as, and many other financial implications that could determine whether or not you should get a business bank account. Understand that even if you don’t start out with a business bank account, you will probably need one eventually, but also keep in mind that you will want a business bank account for the following things.
1. To Comply With Your Bank’s Account Rules
Some banks may require that conducting business activities such as receiving a high volume of payments for goods or services be only done with a business account. And to take payments via credit card, you’ll usually need a merchant account that’s either a part of a business bank account or connects to it. Even if you are simply a sole proprietor when it comes to running your business, you should check with your bank to see if taking in certain payments or making business purchases would send a red flags on your personal checking account.
2. To Make Sure Personal And Business Tax Records Are Completely Separate
When filing taxes, the forms for personal income taxes and the ones that deal with business revenue, expenditures and payroll issues are very different. Taxes can already be complicated enough, but if you mix personal taxes with business ones they can become a major mess. Just in case the IRS finds some discrepancies when they comb through your records, it’s best to have business financials ready to show as proof of business purchases or accounts receivable.
3. To Get A Business Loan
While this may not be your immediate priority, at some point you’ll probably want a business loan to be able to grow and meet customer demands. To get a business loan for that, you’ll certainly need a business bank account. If a regular business loan isn’t something you qualify for at the moment, self employed loans may be an option. Self employed loans can be a little more like personal loans from private lenders, but with some less difficult qualifications compared to traditional business loans.
4. To Protect Your Personal Assets From Lawsuits Or Other Claims
It’s an unpleasant issue to deal with, but unfortunately a risk of starting your own business is potentially having to deal with insurance claims, or lawsuits and court costs in the event something goes wrong. When this happens, it’s absolutely important that any damages you have to pay are charged to your business and won’t put any of your personal assets at risk. If both your business finances and personal finances are mixed into one bank account, the court may hold you personally liable for damages. If on the other hand you have a registered business and a separate business account, the plaintiffs should not be able to sue you personally.
5. To Improve Your Business’s Reputation And Make It More Official
If nothing else, you want to make sure whenever your business writes checks that it has its name on them and not your own. Clients want to know that they’re getting paid by a legitimate business and like to know that it’s been established for long enough to be credible. A business bank account takes a few more verification steps than a regular checking account, so clients definitely have assurance of your business legitimacy in that regard.
The bottom line is there are far more reasons than you might think for opening a business bank account, and you’ll probably be happier you did so in the long run. It is true that some business bank accounts have much higher maintenance fees than personal accounts, and some even have limits on cash deposits or withdrawals. But not every bank is the same, so when shopping for a good bank to open a business account with, take a close look at each bank’s policies and fee schedule to see whether you can get any discounts or fees waived