Having been responsible enough to create a legal entity by legally registering your business, you need to decide where to lodge the proceeds of your business .
Opening a separate bank account for businesses is a requirement for every business , be it Limited Liability Company, Partnership and Corporations and highly recommended for Sole proprietors for smooth running of business .
Let’s before now you use a Personal checking account for your business transactions, you may want to open a business bank account. There are many benefits of a business checking account. As you continue to grow your company, keep these business bank account benefits in mind.
Your Business Records are Organized
A business checking account organizes your business records more effectively by separating your personal transactions from your business transactions. All your business transactions are tracked on a separate statement so as to maintain accurate track records and monitor your business’s profitability.
As a result of this, it is very necessary to separate Personal Checking Account from Business Checking Account, mixing personal and business transactions into one account might pose a hard time trying to determine profit margin. To find your profitability, you must remember which expenses were personal and omit them.
Accepting Credit Cards Transactions
Many consumers pay with credit cards over cash. Accepting credit cards helps you serve a larger number of customers because you limit your customer pool and potential sales when you only accept cash payments.
You can set up a credit acceptance system through the bank with your business checking account. Or, you could set up a merchant account with your business checking account.
Although you benefit from not running a cash-only business, you may have to pay the bank extra to accept card payments. It is important to effectively check card maintenance and transaction charges/fees before signing up for credit processing services . But, you might benefit . Look into maintenance and transaction fees .
Establish Business Relationships with your Bank
It is even more professional to pay vendors with checks(cheques) that have your personal information printed on them, tell customers to issue payments in favor of your business name.
Opening a business checking account can also help you establish a long term business relationship with your bank. Relationships with your banking can help you grow your business. For example, if you need financing, you may want a small business loan. A relationship with your bank representative might help you get better loan terms.
Multiple Business Account Signatories
Multiple signatories is an important feature of business checking account. You can have multiple signers on a business checking account. In other words, you can allow other people to use your business checking account.
While you run your business, an employee can do some administrative banking duties. This could allow you to focus more time on revenue-generating aspects of your business.
If you allow others to use your business checking account, be careful who you give access to. Be sure you trust each person who handles your business’s money. Keep in mind that if you are a sole proprietor, you open the business checking account with your Social Security number. Whoever uses your business checking account has access to your Social Security number. Trust is essential for sole proprietors who give employees access to their checking accounts.
Ensures Accurate Taxes and Deductions
Separating business transactions into a business checking account does not just help you organize financial records. A business checking account also helps you file taxes which requires your business transactions separated from your personal transactions.
A business checking account helps to ensure you file taxes accurately. You look at your business account statement and record the figures on your tax return. Accurately filing taxes becomes harder when you mix personal expenses in the same account. You could face penalties from the Tax Authority if you do not file taxes accurately.
You can deduct business allowable expenses from your tax return which may be easier if you use a business checking account. You must prove all allowable expenses for tax purposes.
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