Why Your Small Business Needs a Business Checking Account
For many small business owners, opening a checking account is a critical step to keep track of expenses and manage the growth of the business. Your business funds should be completely separate from your personal funds, which is why a business checking account is crucial for any business. Below we’ll talk about the benefits of keeping your accounts separate.
Avoid Tax Issues
Combining personal funds with business funds can create major tax issues. The main reason for this is because of the IRS. If your business is audited and your finances are all mixed together in one account, then you’ve created a major headache for yourself. Keep your personal funds in a personal account and your business funds in a business account.
Prove Your Business is Legit
A business account proves that you are serious about your business and it’s not just a hobby. This is extremely important when dealing with the IRS. Three out of every five years, you’ll have to show that you’re making a profit on a Schedule C form. If you aren’t, the IRS will label you as a “hobby business” and you won’t be able to deduct any expenses or take any loss for it on your tax return.
Keep Things Professional
If you’re running a business, you want to look professional. If you’re writing checks from a personal account or having checks written to you as an individual, this may look unprofessional to suppliers and clients. Having a business account shows you’re serious about your business and people will be more likely to do business with you.
Registering your business as a limited liability company (LLC) or corporation means that your personal liability in the business is limited. This provides protection for you if someone tries to sue your business, or any other legal issue occurs. In order to have full protection, you must keep your business and personal funds separate, or you could be putting your personal assets at risk.
Organized Business Records
Keeping personal and business funds together can make it extremely challenging to do accurate bookkeeping. You’ll have to search through personal transactions to find your business transactions, which makes it easy to miss important business expense deductions that could cost you a lot of money. If your expenses are in separate accounts, you’ll have a clean record and won’t have to worry about tax issues.
As your small business grows, you want to have a solid financial foundation. Opening a business bank account will give you that foundation, while establishing yourself as a business professional. At Energy Capital Credit Union, we have business checking accounts designed with your business needs in mind. If you have questions or are interested in opening an account with us, we’re ready to help! Contact us!