When running a business, opening a business checking account is essential. It may seem easier to use your personal account for your business, but there are many consequences of not creating a separate account. Here are the top four reasons why opening a business checking account is in the best interest of your business.
1. Separate Business and Personal Finances.
Having two distinct accounts keeps your financial landscape organized when it comes to expenses, taxes and income. For example, you do not want your Chick-fil-a lunch from yesterday next to a supplies expense for your business. Commingling of personal and business funds also increases your risk of fraud. Without a business bank account, it can become complicated if you ever want to sell your business. Your business balance sheets will include personal financial information, which can create confusion when it comes to the financial well-being of your company. Depending on how you register your business, you may also be required to open a checking account. If you register your business as an LLC, a Sole Proprietorship with DBA, a C-Corporation or an S-Corporation, you’re required to open a business checking account.
2. Future Financing.
Creating a business checking account allows you to have separate credit cards. Having individual cards keeps your bank account history clean and organized, which can help set you up for success if you need a business loan in the future. Banks want to see that a business has its own account, stable income and an owner with a good credit score. Conversely, poor credit can put your business’s financial future at risk. Many small business loans are only accessible to businesses with their own checking account. Therefore, if you want to apply for a business loan, you will be required by the financial institution to have a business checking account.
3. Accepting Credit Cards and Checks.
Business checking accounts allow you to accept credit card payments for your business. If you cannot accept credit card payments, you could lose potential revenue. Using a business account helps you keep track of every payment and refund without personal purchases interrupting. Having separate accounts is especially helpful if you are an eCommerce business. A separate business checking account with its own credit card also sets a professional tone. If you write a check for a business expense, having a check with your business’s name appears more professional than having your name on the statement. Your company’s name on the checks you are using to pay vendors, suppliers, etc., also helps with the organization of the company’s books.
4. Professional Partners.
Often businesses have numerous people running the company who will need access to the company’s finances. Without a business bank account, it would be challenging for the business to run smoothly. As your business continues to grow, you’ll likely add more administrative employees who will need access to the company’s finances. Without a different account, you will be giving these employees access to your personal finances. That can cause many problems in the future, including fraud and commingling of funds. Opening a business checking account could protect you from financial risks, and it will help keep every payment made by a partner orderly in your account history.
Having a business checking account is one of the first crucial steps for establishing a business poised for success. The advantages of opening a business checking account are numerous, but it’s especially important for tax purposes, payroll and business expenses. Ultimately, it will benefit you both professionally and financially to open a business checking account.
Live Oak Bank offers a simple and secure business checking account.