6 Reasons Why You Should Get A Business Bank Account
Written By Joshua Proto
Nearly every successful business, regardless of the sector, industry, or vertical in question, has a dedicated business bank account. A dedicated business banking account expands their options for funding, improves their brand, and helps establish trust between current and future customers. These are only general benefits of having a dedicated business bank account and are covered in more detail below.
All businesses seek the same thing from their customers, trust. A dedicated business bank account builds trust by showing professionalism, especially if clients are to pay by invoice. You also don’t want your customers to think you aren’t fully open for business or have them dispute a charge because they can’t recognize the business because of your personal name associated with the accounts. Business accounts help build trust with customers by giving them the security that their money is going to be received for a legitimate good or service.
Having a separate bank account for your business also clarifies all of your business expenses as they are clearly separated from your personal expenses. This is particularly relevant if you hire an accountant for filing taxes, as they may not know the differences between what you consider a personal expense versus a business expense if all transactions are happening in the same account. This could either lead to your business being charged more during tax season as the accountant could miss deductions and/or spend more time trying to understand the muddled bank statements. Having separate accounts is also invaluable if the government ever decides to audit your business. A separate business account makes a clear distinction between personal and business transactions that the government can evaluate and appears credible and reliable.
As the number of your business transactions increase, so will the possibility of any kind of fraud or identity theft. A business account prevents any potential fraudulent activity from also affecting your personal finances since they would be connected to their own respective accounts. To go a step further, establishing an employee identification number (EIN) with your business bank account, instead of associating it with your social security number, offers another layer of protection for your personal finances.
To function as an incorporated LLC, Corporation, or Partnership requires the business entity to have a business account. These accounts are owned by the entities themselves and thus a personal bank account cannot be used. In these entities, it’s also common for more than one person to have authorization to use the financial accounts, which would not be ideal for a personal account anyway!
5. Build Banking Relationship
As your business grows, you may find that it could use additional services a bank could offer. This could either be a business loan or a business line of credit, but either one requires a bank to review your financial statements to fulfill. Creating a business bank account at a bank that offers these services helps establish a business relationship and can make it easier for them to analyze the business’ financial history. Some banks may even give special rates or terms to businesses that already have a bank account with them.
6. Pursuing Financing Options
To determine your business’ eligibility for financing, banks, investors, and other lenders evaluate the income and expenses of your business, which proves difficult without a separate business account. Some lenders won’t even consider financing your business without one! It gives lenders more confidence to finance a business rather than an individual, as businesses usually have other assets or receivables to serve as collateral or show evidence of future cash flow.