One of the first things every entrepreneur should consider is creating a dedicated bank account for their business. It is not a legal requirement, but it’s the right thing to do. This article will list the top seven reasons why.
What Is A Business Bank Account?
It is simply a dedicated bank account for your corporation. It works similarly to a personal account; you can make payments, deposits, withdrawals, etc. Most financial institutions offer special accounts for businesses with unique features like higher interest rates for savings.
The top seven reasons to use corporate accounts include:
It makes your business look more professional to customers and fellow businesses. When it’s time to receive a payment, using an account registered in your formal corporate name looks better. Similarly, it looks professional for vendors and employees to receive payments from an account registered in your corporate name.
Using a personal account to conduct business sends the wrong signal. Customers and vendors may consider you unserious and assume you’re not in business for the long run.
Easier Tax Preparation
Corporate accounts allow you to monitor all transactions rigorously. This makes it easy to monitor all your cash inflows and outflows to report to the appropriate tax authorities. It also makes it easy to track corporate expenses that you can deduct from your tax liabilities.
You could even integrate your bank account with your tax preparation software. This integration enables you to automatically create tax reports and save the time you would have spent preparing the reports manually.
Limited liability refers to a situation where the owners of a business aren’t personally responsible for corporate debts and judgments. Virtually all countries allow people to register limited liability firms; one of the conditions is having a separate business account. This way, corporate expenses will be separated from owners’ personal expenses, making it easy to determine who controls which asset in case of bankruptcy or court judgments.
Most banks require corporate accounts before issuing a loan to a business owner. Thus, you’ll need one if you ever want to apply for a loan from your financial institution. You can build a solid credit relationship with your bank by repaying loans on time, and you’ll get easy access to credit because of your reputation.
Similarly, corporate accounts make it easier to apply for government subsidies, grants, or any other type of monetary support. You can hardly get a government grant with a personal account because authorities will assume your company isn’t legit.
Financial institutions usually offer complementary services to lure business owners. For instance, you can get free billing and invoicing tools when you sign up for an account. You might also get free subscriptions to tax preparation software after signing up.
Financial institutions usually offer lower transaction fees for corporate accounts. Some even waive transfer fees altogether if you transact above a specific volume monthly. You’ll save considerable money by taking advantage of these lower fees in the long run.
Bookkeeping is the process of keeping accurate financial records for your corporation. Corporate accounts enable you to automatically log and categorize any financial transaction, saving you considerable time and effort.
We have explained the main benefits of using dedicated corporate bank accounts. The good news is that opening one is easy and straightforward. You can open a business account online or in person and start transacting professionally.
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