3 Reasons Why You Should Have A Business Account

You are rocking and rolling in the business world from homemade baked goodies to building and selling custom furniture. You have money coming in and money going out, but not to worry you have saved your receipts for your tax preparer so you should be good, right? Well, the short answer is yes… and no. In today’s post, we will discuss 3 reasons why having a separate bank account is both ideal and necessary even for the solo-preneur.

Reason #1: Learn to separate business and personal

For most entities, it is actually required to have business and personal separate. If the IRS were to come knocking with an audit, mixed personal and business expenses can raise a red flag that the numbers aren’t what they seem (whether that is true or not!).

Now for sole proprietors, this is not a legal necessity since all business income is considered “pass through” meaning that all business income is personal income. However, I would highly recommend still putting in that effort to separate your business from personal.

Reason #2: Accurate Reports

I want to challenge you to treat your business with the respect it deserves. Sure your business may be on the smaller side right now, but who is to say it won’t grow exponentially? What if you decide you need to hire a virtual assistant and need to know how much you can afford? Do you really want to have to go through months worth of bank statements to pull out the business income and expenses? Or you could set up a completely separate business bank account, hook it to your accounting software, and be able to pull that information within minutes.

Reason #3: Building equity and saving for taxes

As a general rule of thumb, it is recommended to save 30% give or take of income for taxes. You obviously need a place for that money to be held. Personal savings can be too tempting. A checking account won’t do you any good. A business savings account is the only ideal way to save for these unavoidable expenses. On the flip side, you also want to grow a profitable business and that means building equity. This can be especially helpful when and if you decide to expand your business. Instead of cooking from your home, you can now rent a commercial space. You could upgrade your warehouse from your garage to a larger workspace.

Ultimately, every bookkeeper and accountant will strongly encourage you to have a separate business bank account. I personally use RelayFi. Not only does it have no monthly fees, but it is also built with the future in mind. We need our accounts to be able to connect to Quickbooks, Xero, Gusto, Expensify, etc. As a bookkeeper, I need to be able to gain 3rd party access to my clients accounts. RelayFi actually allows me to securely login to one portal and be able to access those different client accounts. No more chasing down 8 different logins for each client. Hallelujah!