Whether you are an entrepreneur in the early stages of your business or a seasoned business owner it’s very important you have separate financials for your personal life and for your business.
Having separate accounts might seem like an annoyance but from a tax and legal perspective it’s something every serious business owner needs to have. It also makes your business bookkeeping process less complex than it already is because there would be no stress figuring out or confusion about what expenses are personal and what are business come tax time.
Below are the 3 accounts you should have as a business owner:
1. BUSINESS CHECKING
If you are accepting payments from your customers (especially credit card or debit payments), issuing refunds or making purchases, you need somewhere to keep those funds and that would be in a business checking account. Other benefits of a business checking account include the ability delegate financial tasks to trusted employees by adding them onto the account. This way you can avoid having to give them cash advances or reimbursements for certain business transactions they can make on your behalf. You’ll also be able to monitor the transactions they are making easily by logging into your account and you can also set limits to how much they can spend. In addition by having a business checking account, you can also start establishing a relationship with your bank over time in the event that you need financing for your business in the future.
2. BUSINESS SAVINGS
It’s certainly a good idea to have a business savings account where you can build up mid to long term business savings for future projects, products or whatever long term ideas you might have in mind for your business. Having business saving means that instead of having to rely on outside financing and paying interest you may be able to self-finance your next project on your own.
3. BUSINESS CREDIT OR CHARGE CARD
Having a business credit allows you to establish business credit history with the commercial credit bureaus over time. This is important in the event that you require further financing for your business. In addition, having a business credit card may provide you with certain types of purchase protection and may also provide you with the benefit of earning rewards or points based on your transactions. You’ll also be able to add on employees and monitor their transactions. Keep in mind though, that similar to your personal credit cards, you should avoid carrying a revolving balance and instead pay your balance off in full each month.
Note: In order to establish business credit that is completely separate from your personal credit, you need to set your business up as an LLC / Corporation. If you are a sole proprietor, your business credit is tied to your personal credit – post on business credit coming soon 🙂
If you are a business owner but you don’t already have your business accounts setup, you should consider getting them set up as soon as you can.
Two great resources to help you get started with your research on finding the best business checking, savings and credit card accounts are NerdWallet.com and BankRate.com (under account type, select “Business”).
Has this post has been helpful in explaining why you need separate business accounts?