If you run an enterprise, you should have a dedicated business banking account. It is even a legal requirement in a few cases. This article will show you the benefits of doing so. They include:
Simplify Tax Return
Having a dedicated account for your company makes it easy to track your revenue, profit, and business expenses to report to tax authorities. In contrast, you will find it difficult to use an account that is mixed with your personal expenses. Having separate ones makes it easy to identify which legitimate expenses you can deduct from your tax liabilities and take advantage of the tax perks offered to corporations.
Automated Accounting and Reporting Management
You can link your account with bookkeeping and accounting software to automate a lot of reporting that you would have done manually otherwise. After syncing it, the software can automatically record your money inflow and outflow. You just need to check up regularly, verify the details, and make any changes if needed.
This automation frees up considerable time that you can channel toward growing your business. It also makes it easy to assess cash flow, income and expenses to verify that your company is in good standing.
Acceptance of Various Types of Payments
Having a dedicated account for your firm makes accepting different types of payments easy. For example, if you have an online business account, you can accept credit card payments and mobile options like Apple Pay and Cash App. You can also accept funds via wire transfer, ACH transfer, digital money transfers, etc.
Digital payments are taking over our world, and you can set up a merchant services account for your business to accept them. You won’t be able to do that with a personal account.
Proof of Legitimacy for the IRS
If you want to deduct business expenses from your taxes, you must prove the legitimacy of your business to the Internal Revenue Service (IRS). This agency must be able to verify that you are running a legit business and not a hobby. In its own wording, the IRS will look at “whether the time and effort you put into the activity indicate you intend to make it profitable” and “whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records” among other things.
Business banking makes it easy to keep track of expenses and revenue and maintain accurate books and records as required by the IRS.
Simplify Loan Application
Business banking makes things smoother if you apply for a loan to cover expenses, buy equipment, invest in a new outlet, etc. It makes it easy to provide the documentation that banks require for loan applications. For example, you will have to provide financial statements and income tax returns dating back to a specific period. With a separate account, it will be easy to do that.
Professionalism
Having a separate company account makes you look professional when transacting with clients. Using a personal account to transact can leave some bad taste in clients’ eyes. They may think that you are just starting out and your business may not last long. They may also assume that you are a one-person show lacking the human resources to meet their needs.
It looks much more professional for clients to write your formal corporate name when they want to pay for goods and services. It also looks better to use a business card to pay suppliers and service providers.
Conclusion
We have listed and explained the good reasons for you to open a business bank account. Among others, it makes you look more professional and allows you to stay on top of your expenses and cash flow.
These days, it is very easy to open this type of account. You can do that at your local bank or use an online provider like Silverbird.
