One of the basics of small business banking is to set up a business bank account. This fundamental business function is often lost with new and part-time business co-mingling personal and business funds. Using a personal bank account for small business banking is common among part-time business like multi-level marketing and self employed sole proprietors such as realtors and consultants, according to www.thebalance.com
Frequently, business owners try to process business transactions through their personal bank accounts in an effort to reduce expenses and bank fees.
Unwittingly, they may be creating potential problems for the business in the future.
Not convinced that you should keep your personal and small business banking separate? Here are some reasons.
- Hobby business classification: If your business goes through your personal account you may be giving the impression that this is a hobby (a personal bank account for business creates a harder time convincing the government you are operating a business).
- Limited audit trail: While the government does not require you to have a specific record keeping method or separate bank account, it does require that whatever method you use, that all records be accurate, complete, permanent and show a clear record of income and deductions. Providing a separate business statement and record provides a clear audit trail.
- Missed deductions: Co-mingling your small business banking with personal creates a mess of transactions on your account statement. It is easy to overlook or miss deductions you may be entitled to.
- Lack of professionalism: If you have clients who write cheques to you, writing a cheque in your personal name as opposed to business can convey the impression that your company is a part-time or less-than-serious venture. Even if your business is part-time, take it seriously and your clients will, too.
Take the time to open a small business banking account to simplify your record keeping and life. Shop around for the best deal. Small business banking varies in fees and features. The costs of a business account are far less than the benefits to your business.
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