1.Streamline Record keeping for Tax Time- When using one checking
account for home and business expenses, you’ll have to dig through
receipts, and breakdown credit card statements. To not miss out on
important deductions set up designated check, savings, and credit card
accounts for the business and use them only for business. It will be
much easier to identify income and expenses. Try out some type of
organizer for your receipts so you don’t lose them in your wallet or purse.
2.See Cash Flow More Clearly- Having a clear view of cash flow allows
you to be productive about managing it and spot problems before they
happen. Internet and utilities are typically billed the same day each
month. Business cash flow is harder to track if your account includes
both business and personal. Keeping them separate helps reduce risk of
error, and helps figure out where to look for cost-saving.
3.Have Everything in Order for an Audit- keeping business and personal
is not only beneficial for tax time, but also for audits. Having both
personal and business in one account could cause incorrect categorizing
of transactions. If you’re a Sole Proprietor, you are required to submit
bank statements to the IRS. Plus be sure to have always have supporting
documentation for any deductions claimed. Separating finances will make
it less painful during a tax audit.
4.Business Credit- Opening a business bank account and credit card is an
important step that will build your business’s credit profile. Use a
business credit card for business expenses only. It will help increase
your business credit limit, and lower interest rates down the road. In
some cases the interest paid on a company credit card is deductible as a
business expense.
5. Know Your Business Classification- Make sure your business
classification is a good fit. As your company grows you may need to look
into different classifications. Being an LLC requires you to have
separate bank accounts, as it is a distinct legal entity, and also needs
a tax identifier number. It minimizes a business owners personal
liability. If you mix business and personal, and your company is sued,
they can go after your personal finances as well.
