One of the biggest mistakes made by small-business owners is not creating a second account for business purposes. The use of personal bank account for small-business ventures, like self-employment, is all too common.
However most ‘new’ entrepreneurs will often attempt to process business transactions through personal bank accounts to avoid opening a new account and bank fees. Though it seems like a great idea, it will more often than not cause problems in the future. Here are 5 reasons why you should never mix personal and business accounts.
Hobby Businesses. Government laws state that only businesses are eligible for business expenses. Using a personal bank account for your business transactions will make it a little more difficult to convince the government that your hobby is an actual business. Business banking can solve this problem fairly easily, and help you keep track of things in a much better way.
Lack of Professionalism. Taking your business seriously is the best way to keep or add clientele. Having a client write a check for your services or items in your personal name instead of a business name conveys the idea that your business is a part-time venture. Even if it is only a part-time business, it still deserves the same amount of professionalism as a full-time business.
Audits. Although it is not legally required to keep a separate bank account for your business, it is required for records to be accurate, complete, and shows a clear record of deductions and income. Being able to provide a clear record of transactions will help make an auditing far simpler.
Tax Time Disaster. Tax time is always a stressful time for any small-business owner. Keeping a separate bank account will help you avoid the time consuming process of going through bank statements to deduce which are business related transactions and which are personal.
Missing Deductions. Having to take time to go through all of the transactions of a personal bank account that funnels a business through it can not only take up more time and money, it is also a great way to miss plenty of deductions that could have been earned. Keeping clear and separate records for a business is the easiest way to ensure you receive all of the deductions your business is entitled to.
Banking fees and features for business accounts vary from bank to bank, so be sure to shop around for the best deal for your business. Remember, your business is a business and should be treated as such.
Again, stay tuned for our ebook which will provide all kinds of useful information on how you can better organize your rental or property management business. In the meantime, why not check out our pricing and plans to see how Rentpost can help you stay at the top of your game?