Ten Compelling Reasons to Maintain Separate Business and Personal Finances
The old adage of not mixing business with pleasure is still relevant today, especially when it comes to keeping your business finances separate from your personal funds. Many small business owners will use their personal banking accounts to pay for business expenses and not think twice. While it may seem easier, it can come at a pretty high cost, including increased legal risk, missed tax deductions and compliance issues.Here are ten compelling reasons why you should maintain separate personal and business accounts and the benefits of each.
1. Track Cash Flow with Ease
Tracking business expenses can be challenging - especially if they are tied to your personal finances. Given the fact that there are multiple types of expenses, it’s important to track them accurately and in a timely manner. That way you have access to spending information that allows you to make real-time decisions about finances, budgets and strategic priorities. A business banking account provides this critical resource to automate, accelerate and improve your expense management.2. Simplify Taxes1
Establishing a business account that is separate from your personal account will make it easier at tax time. Whether you pay quarterly or annually, when you take the steps beforehand to separate your business checking account from your personal bank account, you'll be able to quickly find the relevant information for your tax statements.3. Earn Tax Credits and Deductions1
You may be eligible for tax deductions and benefits that you weren’t even aware of. There are many potential tax write-offs business owners can benefit from, it's probably best to review your situation with a CPA for professional guidance.4. Protect Your Assets from Legal Liabilities2
Maintaining separate accounts is a great way to draw a clear-cut line between your personal and company finances and can help to protect your personal assets from business debts and liabilities. For example, when you form an LLC, the principals have limited personal liability related to the company’s debts. This means that if the LLC defaults on debt or is sued, your personal assets aren’t at risk. Instead, the liability is limited to what each owner invested into the business. However, if you don’t have a clear separation of your personal and business finances, what you have invested – the amount that you’re responsible for – can be difficult to identify.5. Improve Your Business Image and Credibility
Your company’s reputation is one of its most important assets. It can drive awareness of your brand, bring in new customers, and increase sales. When it comes to building a strong business reputation, image is everything. Having a separate business checking account will bolster your company’s appearance of professionalism. Your clients will be more inclined to trust and do business with you, thanks to the legitimacy provided by a business bank account.6. Access Business Only Financial Products and Services
One of the most important benefits of retaining a business account that is separate from your personal account is the ability to access financial products and services that are tailored to business needs. A dedicated business checking, savings, debit or credit card offers the flexibility you need to meet your business goals. Online Banking and Mobile Banking3 make it easy to manage your finances whenever and wherever it is convenient and give you access to a clear, concise snapshot of all your expenses in one place. Treasury Management solutions to help manage payables and receivables, safeguard against fraud and more.7. Multi-user Access Control
Many business accounts provide access for multiple users to manage your account. This helps to improve your business efficiency by allowing you to grant specific roles and permissions to other users so that they can access your account and perform workflows on your behalf. Each user has their own unique login credentials, so you can maintain the safety and security of your business account.8. Higher Transaction Limits
Business checking accounts typically have larger deposit limits to accommodate entrepreneurs who need to cover big-ticket items, like payroll expenses or office upgrades. Checks issued in association with business accounts often include advanced security features such as watermarks and thermochromic inks to help prevent fraudulent activity.9. Build Business Credit
Should you ever need to apply for a business loan, the lender will require you to provide business statements in order to evaluate your cash flow. Having a separate business account will make it easier for you to provide this information and easier for your lender to quickly vet your qualifications.10. Improved Budgeting and Forecasting
Establishing a separate account for your business expenses is a great way to improve your budgeting and forecasting. All of your financial information is available at your fingertips making it the best way to achieve your future goals.
Now that you understand the many benefits of separating your personal and business finances - give yourself some peace of mind. Talk to a Premier Bank Trusted Advisor at your local branch and get an analysis of your current accounts and a recommendation for the solutions available to help you achieve all of your business goals.