Do I Need A Business Bank Account?

Business banking allows you to pay your suppliers and bills using an account and/or checks with your business name on them. That alone boosts your professional reputation and reassures those with whom you’re doing business that you’re both legitimate and here to stay.

Sure, it’s possible to use your personal account  — you can even use a personal credit card to run your business. However, doing so means you need to take extra steps to track and separate your personal and business expenses. Even more important, mixing funds can actually trigger an IRS audit, which is something few people enjoy.

It’s important to separate your business income and costs from personal to give yourself the ability to have organized banking and financial records. This is crucial if you plan to sell your business one day, add partners or investors, and manage your expenses wisely. Not complying with tax laws is an easy way to end your business’s journey quickly.

When you separate your business and personal funds in different bank accounts, your personal assets are protected from liability if your business is sued or seeks bankruptcy protection. That’s not the case if you run your business using your personal accounts and mingle your business and personal funds, no matter how carefully you keep track of everything. So unless you are comfortable risking everything you own, establishing a business bank account should be a priority.

When opening a business bank account, you will find numerous ways to improve your business efficiency. And even if your business is still relatively small and easy to manage, smart business owners always have growth on their minds.

For one thing, when you separate your funds by setting up business banking services, it’s easier to use accounting software to track your finances and pay your bills. Business banking accounts are, by design, made to accommodate payroll and online banking services. That can make everything easier, from daily operations to tax filing at the end of the fiscal year. And if your future plans include hiring employees, business banking can help there, too.

If your business takes off, you may want to hire a CPA or tax professional to help you with your finances — and you probably won’t want that person seeing every personal purchase you make. Even if you’re fine managing your business funds now, look ahead and sign up for a business account.

This might not seem like a big motivation right now if you’re the sole owner and your business’s only employee. But peer into the future a few years. Do you see yourself hiring anyone to help you run your business? How comfortable will you feel allowing others to log in to your personal bank account to check to see if a payment has cleared or an invoice has been paid?

Business banking accounts are inherently scalable, which makes it easier to change and grow with your small business’s needs. If you’re eventually too busy to manage every business transaction yourself or you hire more employees, it’s important to have a business banking account because it gives you the ability to allow others signing authority.

On the same note, many business bank accounts allow you to give multiple credit cards to your employees. This saves you the hassle of reimbursement and keeping track of receipts from employee purchases.

Right now, you may not need any additional funding for your small business. That could change, and you might someday want to apply for a loan, a line of credit, or a business credit card. If your business does not have established business credit scores, you’ll find it very difficult, if not impossible, to qualify for credit.

The good news is that you can build your business credit rating without taking on debt. Simply open a business account, and you’re on your way.

How do you accept payment from customers at the moment? If you want to accept credit cards in person, you might need to access a merchant services account from your bank. Business bank accounts with merchant services are able to process credit and debit card payments from customers. That’s not an option if you’re using your personal accounts to manage your business finances.