Opening a business bank account is one of the most important things you can do when starting a company. A business bank account plays a key role in growing your business, while protecting it and yourself at the same time. It allows you to keep track of business expenses, simplify tax reporting, and deposit payments under your company name.
Even for a sole proprietor who isn’t legally required to create a separate bank account for their business, creating it can still work wonders and give you that peace of mind knowing that your business records are always clean and accurate.
This post from luminablog.co.uk will show you five reasons why a business bank account provides a strong foundation to a business.
Legal Requirement for Incorporations
New corporations are legally required to have a new bank account established under their corporate name. Without a business bank account, corporations won’t be able to receive money from third parties and customers, as they won’t be able to make out a cheque or send payment to your new business.
In most cases, you’ll need to find out about the bank before registering with them. We suggest drawing up a list of business bank accounts first to know which one suits your business. When you create your business bank account, you will also need to include an estimate of the total share value for accounting purposes.
Separate Personal from Business
How much money have you made from your business? It’s important to track your income to reflect your business growth, to keep accurate books, and to make it easier to file your taxes when tax time rolls around.
Depositing business income into your personal bank account requires reviewing all deposits to track your business earnings each month, plus recording the figure separately from your personal finances.
In the case of a sole proprietor, your business would not be considered a separate legal entity so you may think that it is easier to make business transactions out of your personal account as there is no need to separate the two. However, it will take time to sift through your bank account to figure out your business income when filing your personal taxes as well as figure out your business’s expenses to claim. This will take away time that you can spend towards other parts of your business.
Make Expense Tracking Easier
Separating your personal account from your business account can also make it easier to track business expenses. If you make business payments from a personal account, you’ll have to review each monthly statement to identify which expenses are personal and which are business-related.
Opening a business bank account can also help save time by streamlining your business’s financial records and tax information. Finding deductions, for example, can be easier if you don’t have to search through every item in your personal banking statements. Any fees that come with a business bank account can be deducted as a business expense.
Show Your Clients You’re A Professional
Opening a business bank account can show the world that you are professional and that you’re serious about managing your business’s finances, such as using a business account cheque to pay for supplies or services.
When you transact business from a business account, it can assure clients that your venture is legitimate, rather than just a hobby. Managing your business finances professionally can help establish credibility for your brand when you’re starting out.
Monitor Business Progress
One of the best things you can do to establish a healthy business is to monitor its growth and look for opportunities. Monitoring your business finances is a big part of that.
Keeping your business account separate from your personal account lets you check in and check on your progress regularly, so you can make plans to improve and grow.