Why You Need a Business Bank Account as a Sole Proprietor
When you first launch your business as a sole proprietor, it may seem convenient to simply use your personal bank accounts for all of your transactions. However, adding separate bank accounts for your business can provide you with higher levels of asset protection and tax incentives while boosting the credibility of your business.
We invite you to learn about the benefits that having a separate bank account as a sole proprietor can offer your business.
Tax Benefits
Among the biggest benefits of opening separate checking and savings accounts for your business are the tax benefits. Keeping all of your expenses on your personal account can cause quite a headache during tax season.
Don’t let your bookkeeping get out of hand. By keeping separate business bank accounts, you will be better able to see all of the components involved for managing business throughout the year. This will allow you to easily spot any potential tax deductions and give you the biggest return on your taxes.
Every payment should be made with your business account. This includes rent, payroll, and even minor office supplies. When tax season comes around, you will want to be able to clearly identify your capital expenditures, business use of your personal automobile, employees’ pay, insurance costs, rent expenses, and any interest you have paid on business loans.
Talk to a tax professional to make sure you are setting yourself up for the greatest possible return.
Personal Asset Protection
Keeping your personal and business finances separated can help you protect your personal assets if something were to happen to your business. In order to accomplish this, many small businesses elect to become a Limited Liability Company (LLC) or a Corporation. Doing so helps protect any personal property from lawsuits and creditors and, in certain circumstances, possibly even reduce your business’s taxes.
To transition your business to an LLC, you will first want to make sure that there are no ties between your personal bank accounts and your current business revenue. You will want to open a business checking account to handle all of your company-related expenses and income.
Keeping your business and personal assets separate will also protect both your personal and your business credit score. By keeping all of your finances under your business name, you will be better able to increase your company’s credit score.
Building Credibility for Your Business
When a customer receives a bill from your business name (versus your personal name), it helps to develop the integrity and strength of your brand. Imagine seeing a charge on your account from John Smith, rather than Smith Communications. Avoid customer confusion and the chance of a client flagging your charge as fraudulent by keeping all billing and payment within your company name.
Grow Your Business with Axos Bank
While you may not legally need a separate business bank account as a sole proprietor, it is smart to have separate accounts as your business grows. Don’t put off opening an account until your business is successful. Prepare for the future financial growth of your business today by setting up a basic business checking account and business money market account with Axos Bank today.