When it comes to business finance, there are some decisions to be made. If you are going back and forth between opening a separate account for your business finances and combining them with your personal finances, there are some things to consider first. Although putting the two together can seem like the easiest solution to managing your large financial workload, there are many benefits to opening a separate account for your business. Taking the easy way out will only lead to inconvenience and problems down the road. Having a specified business account will actually make your life much simpler.
When tax time rolls around and you have combined your business finance with your personal finances, you are more than likely to experience some difficulty. If it is taking seemingly forever to complete your taxes, this is likely to be the cause. You may have a hard time determining which transactions were yours and which ones were for your business. This can increase your chances of messing something up, and you know tax mistakes are not ideal. When you keep two separate accounts, you will have a much easier time when completing your taxes. In addition to this, if your business must be audited for some reason, you will definitely want to make sure it is clear which finances are being looked at.
Your business finance is a key factor in indicating your business growth. When you are trying to determine if you are headed down the right path, taking a look at each and every transaction associated with your business is essential. When your personal and business finances are combined in one account, this task can become very difficult and time consuming. Confusions can occur and your view of your growth as a business can become obscured.
If you treat your business more like a hobby, then the IRS will see you as such. The rule is that if you do not produce a profit for three of five years, you will become a hobby business. This type of business is unable to claim as much as an actual business. With a separate business account, you may treat yourself as real.
Having a separate business finance account can actually make you feel more professional and like a real business. If you use your personal account for your business and a customer writes you a check, making the check out to your name will surely lower the professional feel. With a business account, your customers will take you more seriously. This will help to boost your confidence, and when you are confident, your business will thrive.