Keeping your business and personal bank accounts separate is an important step in preserving your personal finances and your business. When you mix your business and personal accounts, it can become difficult to track your expenses and income, and it can also make you more vulnerable to fraud and lawsuits.
There are many benefits to keeping your business and personal bank accounts separate, including:
- Easier bookkeeping: When you have separate accounts for your business and personal finances, it's much easier to keep track of your income and expenses. This can save you a lot of time and stress at tax time, and it can also help you to better manage your business finances. If you use an accountant, it will also save you some hard-earned money.
- Reduced risk of fraud: If you have all your money in one account, it's easier for someone to steal from you. By keeping your business and personal accounts separate, you can reduce the risk of fraud and protect your personal assets.
- Increased credibility: When you have a dedicated business bank account, it shows potential clients and investors that you're serious about your business, and not just doing it as a hobby or side hustle. It can also help you to qualify for business loans and credit cards.
- Limited liability: If you're sued for business-related reasons, your personal assets may be at risk if you don't have separate accounts. By keeping your business and personal accounts separate, you can limit your liability and protect your personal assets. This is one of the most important reasons, in my opinion. The last thing you want to do is to lose personal assets because of a business liability.
Opening a business bank account is typically a straightforward process. You'll need to provide some basic information about your business, such as your business name, address, and tax ID number. You’ll want to have an actual business entity established, such as an LLC or an S-Corp as an example.
Once you've opened a business bank account, you'll be able to deposit your business income and pay for your business expenses using the account. You can also use the account to set up direct deposits for your employees and to make payments to vendors. You’ll want to make sure you use the business accounts appropriately, so you don’t create headaches for yourself and your accountant.
Set up different accounts for different purposes. In addition to having separate accounts for your business and personal finances, you may also want to set up different accounts for different business purposes. For example, you could have one account for your business income and one account for your business expenses. This can help you to better track your spending and to save money for taxes.
Use different debit cards and credit cards for your business and personal expenses. This will make it easier to keep track of your spending and prevent accidental overcharges. Regularly review your bank statements to identify any unauthorized activity. Reconcile your accounts frequently. Meaning, compare your bank statements to your records to make sure that everything matches. This is a good way to catch any errors or fraudulent activity.
You may also think about using a different email address for your business bank account. This will help to protect your personal information and prevent spam from reaching your business account. Set up different passwords for your business and personal bank accounts. This will make it more difficult for someone to gain access to both of your accounts if they're able to hack into one of them.
Keeping your business and personal bank accounts separate is an important step in preserving your finances and your business. By following the tips above, you can make it easy to keep your accounts separate and help protect yourself from fraud and other financial risks.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that the strategies promoted will be successful.