The nature of your business really doesn’t matter when it comes to keeping your personal and professional finances apart. You might have an established enterprise, or you may just be starting out, but whatever the case, you have to keep in mind that keeping your finances together is not a good idea.
A number of people who work from home somehow come up with the idea that it is okay for them to keep both their personal and business finances in one account as that is so much easier. Once again, as a business or company owner, you need to know that whether you have a part time business or a full time one, it is mandatory that you keep separate bank accounts. There are some major pitfalls if you continue to mix up your business and personal finances.
Easy to track
People who have had one account for both their business and personal lives have always regretted it sooner or later. The truth is that with a single account, no matter how closely you monitor it and note down the transactions and what not, you will still not be able to get to know the exact amount that is going into the business or coming out of it for that matter. This is one of the primary reasons why you need to start thinking about separating your accounts.
Saves you from coming under the radar of the IRS
Even if you think you are tracking your account pretty nicely, you need to consider switching because of the IRS. Now even though they do not ask you to keep separate accounts, they do need to know exactly how much you are profiting from the business. Having a different account for business purposes will ensure that your personal money doesn’t end up being thought of as business money. Another thing to add here is that separating accounts becomes all the more necessary if you are incorporated or if you plan to be, because a company is required to pay taxes.
The Image of your company
It might not seem like it if you have just started your business, but you and your company need to have a professional image. The truth is that having a joint account will make it look like you are not running a business at all but that it’s simply a hobby for you which you enjoy. When building up a company or business, you have to make sure that people take you and your work seriously. Having a single account for two very different purposes will not help you in this regard.
With a separate bank account for your business, you or anyone else who is handling the expenses will have a much easier time doing it. Dividing these two very different aspects of your life will ensure that you aren’t exceeding on the taxes and are managing things very nicely. Plus, because everything will be on a different account, you will have no difficulty in making transactions as there will be no confusion.
Avoids getting you in trouble
Okay, so let’s say that along the way, while you are successfully running your company, you are suddenly slapped with a law suit. The rule is simple, having separate accounts will keep you safe and will provide you with the legal protection you need. If you have the proof of a company as a separate entity, the law says that the blame goes on the corporation and not on you as a person. On the other hand, if you do not keep two accounts, you will be held responsible for the error that has been committed.
Therefore, as a conclusion, you can say that it is a good idea to keep separate accounts for business and personal matters is because it will be easier to track, you’ll be saved from the IRS, you will maintain a good image of the company and lastly, you will avoid getting into any kind of legal trouble.