Separating your business account from your personal banking is a step in the right direction toward taking your business to the next level and developing thorough accounting practices. If you haven't opened a business account yet, First Citizens Bank reports that you'll need some documentation like your Federal Employee Identification Number (EIN), government-issued business license, and, depending on your business type, a signed agreement from all board members or business partners. Learn more about the benefits of opening a business account and how it can help create a safer and easier way to run your business.
Developing a Professional Image
Your customers are a top priority. This is important to keep in mind when considering opening an account under your business name, which can give your customers a sense of confidence when they pay your for goods or services. It also helps separate you—the owner—from your business. If an audit were to take place, you can rest easy knowing that there will be no confusion as to where your business transactions originated. You can also minimize the threat of creditors making a claim against you personally if there is a clear separation in accounts.
Tax Season: A Crucial Time of Year
Another instance where it’s beneficial to keep your two accounts separate is during tax preparation season. With a business account, the entire year's business expenses are separate from any personal purchases. The U.S. Small Business Administration recommends setting extra money aside before tax season, especially if you plan to make quarterly payments. Having money in a business account prevents the need to drain your personal account in order to cover your taxes.
Personal and Business Credit Scores
As a business owner, you should be concerned about both your personal credit score and the score of your business. An article in USA Today suggests incorporating your business as S-Corp, C-Corp, or Limited Liability Company (LLC) to begin establishing good business credit. If you haven't already received an EIN number, contact the IRS. Get a DUNS number from Dun & Bradstreet, the main purveyor of business credit information, to keep a close eye on your score. Taking out a loan and making payments on time and in full will also help develop your credit profile.
Recordkeeping: Know Where You Stand
Keeping accurate details of your finances is crucial for business success. If you don't know how much money is coming in and going out, determining the path for growth can be difficult. The IRS reports that sound recordkeeping helps monitor the progress of your business, identify sources of receipts, prepare your financial documents and tax returns, keep track of your deductible expenses, and serve as a realistic measurement of profitability.