There are so many details to keep track of when you are starting a new business that it can make your head spin. In this dizzy state you can get in when opening your own small business, you must make sure to keep an eye on the most important things. One of the most crucial things you must do when running a business is to keep your personal and business finances separate. If you mix them up, it could end up causing a disaster. Here is a look at the reasons you should keep your business and personal money apart.
In This Post:
1. Avoid Trouble with the IRS
Federal tax regulations require that business owners keep their personal and business transactions separate. While these regulations do not specifically require you to keep a separate business account, doing so avoids muddling the two types of transactions together.
2. Save Time and Accounting Expenses
If you do use a single bank account for both personal and business transactions, it makes for a lot more time and effort at the end of the year when you or your accountant are going through your records during tax time.
3. Simplify Tax Payments
As a business owner, you will avoid tax penalties by paying your taxes quarterly. You will find that this is much easier if you have a separate business bank account that you can make regular deposits in to pay your taxes each quarter.
4. Appear More Professional
When you have a business bank account, it makes you appear more professional. This is especially true when you are sending checks to clients. It will make you appear much more professional when these checks are drawn on an account in your company’s name.
5. Avoid Debt
It can be easy to spend more than you have available if you keep your business and personal finances mixed together. You will avoid the temptation of spending money you don’t have if these two financial sources are kept apart.
6. Getting Credit
When you want to get credit cards or loans, you will find it easier if your personal and business finances are not mixed up. You have to show proof of income to get loans, and this can be hard to do when you have one account that has both personal and professional money held within it.
It doesn’t take much effort to keep your business and personal finances apart. Just open a separate account for your business. Never mix the two up once you have this account open, and you will be free from hassle. Informational credit to D Thode & Associates.