Starting a Business? What to Know About Business Checking Accounts
With the economy surging and many people enjoying more disposable income due to the recent tax cuts, more people are taking actions to realize their dreams of becoming a small business owner. Many of these ventures are started on a very small scale and operated from the home to keep overhead costs low and success high. But in an effort to control costs, some new business startups make the mistake of waiting to open a business checking account specifically for their new company. If you are thinking about starting a small business or have already done so, here are some important reasons to immediately give your business its own bank account.
It's easier to determine potential problems
Small businesses that do not keep their incoming and outgoing money separate from personal and household funds will find it difficult to see if they are earning a profit. When the funds for the business and other uses are commingled, the business owner may not be able to easily notice losses or gains in revenue. Keeping business and personal accounts separate will allow new business owners to see what is working well more easily and make necessary adjustments to things that are not working.
Quarterly tax filings are simpler
Another reason to give your new business its own bank account is because it will make filing quarterly taxes much faster and simpler. When all financial transactions for business are routed through one dedicated account, the banking records will act as a ledger showing incoming money and paid expenses. By definition, money earned by a business venture, minus their expenses, equals the amount of profit that will be taxable.
Dedicated business accounts make growing the business easier
As your business becomes established and experiences growth, it may reach the point of needing more equipment, space, or employees. This will require you to take out a loan for expansion. In order to apply for a Small Business Administration or another business loan, you will need to be able to clearly show the growth your business has undergone and how each dollar has been managed.
Businesses income and expenditures that have been routed through personal or household accounts instead of a dedicated business account may be seen as confusing or poorly managed during the business loan application process. To learn more about why your new venture should have its own bank account, business owners can discuss their situation with a trusted banking professional in their area.
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