Most new business owners do not realize how important it is to have a separate account for your business. Most people consider it a waste of time and money and go on using a personal account for their business as well. However, it is important to maintain a separate business account and we tell you exactly why that is necessary.
It keeps your business’ money identifiable
A business account helps keep track of the debits and credits that your business has incurred. When your business has a separate account, you know the exact financial position of your business at any time. However, when you use a personal account as a business account, you need to be extra meticulous and need to identify personal income and personal expenses at every stage and deduct that from the incomes and expense of the business which, to say the least, can be maddening.
It makes taxation easier
As a business owner, you need to ensure that you pay taxes that are due to you personally for your personal, individual income from the business as well as the taxes that need to be paid by the business itself. Having a separate business account allows the tax authorities to get a clearer picture of your business’ finances.
It allows you to separate your business’ finances from your own
A business is a separate entity in its own right in the eyes of the law. A business’ owner may still have reasonable personal savings even when the business’ profits are very low. Having a separate account for you business will help you gauge the financial health of your business more clearly while keeping your personal finances separate from that of the business.
It keeps banking costs down
Banks charge transactions on business accounts differently than they do for personal accounts. Charges on transactions can be quite high if you are using a personal savings account for your business. Some banks even offer to run a business’ current account for nominal or no charge which is helpful to a business in keeping operational costs down.