Why Not to Use Your Personal Checking Account for Your Small Business
Organization is a crucial practice for any business. This is particularly true when it comes to managing money. Unfortunately, many business proprietors often falter in this area, commingling their personal and commercial funds. While keeping everything in one account may seem convenient at first, it can actually harm your enterprise in the long run.
If your company’s money flows in and out of your personal account, tax season can be especially chaotic. There are many factors at play here. First, you must make sure you actually have the money to pay your taxes. For the self-employed, no one is going to take these funds out of your regular paychecks — you have to do it yourself. These expenses will be far easier to track if you already have a business-specific account.
You must also declare all of your commercial income and expenses. Sifting through a sea of personal transactions to find items relevant to your business will be a serious drain on your time. Plus, you will probably overlook useful deductions due to the messy mix of individual and business dealings that appears on your statements. Do not let your business miss out on this money.
Lastly, if you are audited, you will need a clear history of your business’s income and deductions. If everything is listed under your personal checking account, the IRS may not believe you actually run a valid venture. Save yourself the hassle of trying to convince them.
If your business is the target of a lawsuit and your private funds are linked to it, you are at risk of great personal loss. You could be sued as an individual and your own assets could be endangered. Avoid potential pain by setting up your business as a corporation with its own financial life and identity.
Keep It Professional
Let’s end on a lighter note! A small business account simply enhances perceptions of your firm. You want people to take you seriously, right? Then separate your financial self from your business. It looks amateurish to clients when they receive checks from your personal account. You might also be missing out on greater flexibility in the forms of payment you can accept. Work with a bank to ensure you can take credit or debit card payments — not just cash and checks. This will be more convenient and will attract more customers.
You can read about Citizens National Bank’s business checking options here.