Are you the new owner of a small business? When it comes down to it, how do you manage your finances? Regardless of the size of your company, deciding to open a business bank account shouldn’t be a question of if, but a matter of when. At SmarTax, LLC, our professionals are here to explain what the best business bank account is for you. We are known as the best accountants near me and also Pembroke Pines.
What Bank Account Do You Use?
In an ideal bookkeeping world, every company would open a business account before conducting their first commercial transaction, however, this is not always the case. If you have yet to separate your company’s payables and receivables from your personal bank account, it’s never too late to make that happen.
Did you know that 27% of small business owners use the same checking account for their business dealings as they do for their personal finances? This is not okay. Consolidating all of your income and expenses in one account is convenient, especially if you are a new or part-time entrepreneur, or are operating as a sole proprietor, however it comes with a price.
A Personal Account Is Not The Best Business Bank Account
As we said above, it is never a good idea to share your business finances with your personal bank account. Here are some of the top reasons why you should stop using a personal bank account to run your business:
- Realistic Cash Flow Information
- When your personal and business income and expenses are mixed together in a single bank account, it can be difficult to manage and forecast your cash flow situation. Having a clear understanding of the cash that’s flowing in and out of your business is critical for preventing setbacks like unexpected cash crunches.
- That same financial clarity is also important any time your business needs to:
- apply for a loan,
- obtain new credit, or
- drum up investment funds
- Making it easy for prospective lenders to evaluate your company’s cash flow position and financial health is more likely to lead to a positive outcome.
- Low-Hassle Bookkeeping
- Most bookkeeping operations are an intricate web of deposits, payments, and transfers. And since many business owners put off their bookkeeping duties until the end of the year, confusing personal and business transactions is common when you use a shared bank account.
- If you have ever had to sift through weeks of receipts you know how time-consuming a task it can be. Maintaining separate accounts is the best way to avoid having to figure out whether that 6-month-old cab receipt was a personal or business expense.
- Accurate Tax Returns That Will Benefit Your Business
- Beyond the time-saving benefits you’ll gain from keeping personal and business dealings autonomous, there are some distinct financial advantages attached to filing an accurate tax return at the end of the year.
- The ability to correctly designate payments or deposits as business-related, for example, makes it easier to identify tax deductions and credits you may be entitled to claim.
- On the flip-side, commingling personal and business banking transactions can lead to messy, inaccurate accounting records that result in penalties and fines when your organization is audited.
- Fewer and More Favorable Tax Audits
- Speaking of tax audits, you’ll be far more likely to breeze right through them if you invest in a dedicated business bookkeeping system. Although the government doesn’t require that you maintain a separate bank account for your small or solopreneur business, there are at least three good reasons why you should:
- Because a sole proprietor’s personal and business finances are so closely linked, these types of operations are more likely to be audited.
- The IRS requires that income and expense records be accurate, complete, and permanent. The best way to produce a clear audit trail is with a separate business bank and financial account statements.
- Special tax rules apply when individuals claim expense deductions related to hobby-driven, rather than business income. And if you are audited, the onus will be on you to prove you’re running a bona fide business.
Call The Best Accountants Near Me
When it comes to managing the best business bank account, trust our advice. Separate it from your personal account. Our tax advisor wants to ensure you have all the info you need. The professionals at SmarTax, LLC.want to ensure that you have all the information you need going into tax season this year. It is essential to be aware of all the information involving bank accounts, as they may affect you. For further information call or contact us today, Pembroke Pines. We offer the best tax accountants near me.