Though some business owners might prefer to use one bank account to run both their business and personal affairs, it is advisable to keep financial affairs relating to your business separate from any personal ones. Some benefits of this are detailed below:
Accounting Purposes: Accuracy regarding business records is the key to determining the health of any business so records kept should pertain solely to the business from the moment of its commencement. The amount of capital invested in the business by the business owner and the manner in which it is utilized presents to the business owner an indication of his business affairs over a period. Personal spending can distort information if allowed to merge with day-to-day business transactions.
Some people find it cumbersome to keep two cheque books, one for their personal use and another for the business account, but as the business grows and with it the transactions, it makes even more sense to keep the two separate. This makes bank reconciliations less tedious and tying up invoices with payments made and received is easier especially if there are many small cash transactions made on a daily basis. Moreover, banks will not honour cheques that do not correlate to the name appearing on the cheque so even if you are the owner of the business, it is the business name rather than your own name that should be used when cheques are being sent or received.
Tax Purposes: It is prudent to have a business account for tax purposes in case of an audit when time and stress is reduced in separating out business spending from any personal expenses. If your accountant is helping you prepare your annual tax return having a separate business account can help save you money by reducing his time hours to tie up with what has been actually claimed as business expenses.
Benefits: There is a range of services offered by banks to their business customers with competitive interest rates, credit card facilities and a host of other discounts and benefits. Some banks even offer free business advice on rules and regulations of setting up your business and free accounting software to get you started once the business account is open. Most bank accounts can be operated online or via telephone without face-to-face contact with any bank officials, which mean operating costs are reduced.
Credibility: It appears more professional when you operate a separate business account as it lends more credibility to your business. People are normally more trusting of a business rather than an individual as there is possibility of seeking recourse in case of encountering any problems. In the event of the business being sold, a good set of accounting records, which have been kept specifically for the business, will lend more credibility to the way the business has been run giving the business owner the opportunity to get a price for it that he desires.
Credit history: Using a separate credit card for your business transactions means that you are building up credit history for your business, which can translate into better chances of obtaining a bank loan if the need does arise. This also means there are better chances of opening credit accounts with new suppliers, a helpful option as it gives the business owner some more time to pay for urgent purchases.
SOURCE:
http://www.helium.com/items/1621117-why-you-need-a-business-banking-account
Accounting Purposes: Accuracy regarding business records is the key to determining the health of any business so records kept should pertain solely to the business from the moment of its commencement. The amount of capital invested in the business by the business owner and the manner in which it is utilized presents to the business owner an indication of his business affairs over a period. Personal spending can distort information if allowed to merge with day-to-day business transactions.
Some people find it cumbersome to keep two cheque books, one for their personal use and another for the business account, but as the business grows and with it the transactions, it makes even more sense to keep the two separate. This makes bank reconciliations less tedious and tying up invoices with payments made and received is easier especially if there are many small cash transactions made on a daily basis. Moreover, banks will not honour cheques that do not correlate to the name appearing on the cheque so even if you are the owner of the business, it is the business name rather than your own name that should be used when cheques are being sent or received.
Tax Purposes: It is prudent to have a business account for tax purposes in case of an audit when time and stress is reduced in separating out business spending from any personal expenses. If your accountant is helping you prepare your annual tax return having a separate business account can help save you money by reducing his time hours to tie up with what has been actually claimed as business expenses.
Benefits: There is a range of services offered by banks to their business customers with competitive interest rates, credit card facilities and a host of other discounts and benefits. Some banks even offer free business advice on rules and regulations of setting up your business and free accounting software to get you started once the business account is open. Most bank accounts can be operated online or via telephone without face-to-face contact with any bank officials, which mean operating costs are reduced.
Credibility: It appears more professional when you operate a separate business account as it lends more credibility to your business. People are normally more trusting of a business rather than an individual as there is possibility of seeking recourse in case of encountering any problems. In the event of the business being sold, a good set of accounting records, which have been kept specifically for the business, will lend more credibility to the way the business has been run giving the business owner the opportunity to get a price for it that he desires.
Credit history: Using a separate credit card for your business transactions means that you are building up credit history for your business, which can translate into better chances of obtaining a bank loan if the need does arise. This also means there are better chances of opening credit accounts with new suppliers, a helpful option as it gives the business owner some more time to pay for urgent purchases.
SOURCE:
http://www.helium.com/items/1621117-why-you-need-a-business-banking-account
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