Do I Need a Business Bank Account for My Business?

Suppose you’re like many business owners, your small business likely began as a hobby and grew there. When it started, you probably used your personal checking account for business and personal transactions alike. Still, as your company has grown, you may have asked, “Do I need a business bank account?”

Here are some things to consider as you make this important decision:

Protection from Liability

You might not immediately think of liability issues when considering business bank accounts. Still, when you register your business as an LLC and then create a separate bank account for your business, it becomes clear that you and the business are separate entities.

As a result, if someone files a lawsuit against your business, you cannot be held personally liable. Depending on your business type, you may be more likely or less likely to face a lawsuit.

Filing Taxes

If you ask the IRS, “Do I need a business bank account?” the answer will almost always be yes. The IRS recommends that all business owners (including sole proprietors) have separate personal and business bank accounts. That’s because paying quarterly taxes and tracking expenses becomes much easier when you have separate accounts.

When you run a business, no one else is withholding taxes for you, which means that you are required to pay what you owe every quarter. Calculating your income and accounting for any business expenses can be a real headache if you have to search through your personal checking account for relevant transactions.

Simplifying Business Transactions

If your business has employees, and you pay those workers from your personal checking account, your company won’t look legitimate. On the other hand, opening a business checking account means you’ll get checks with your business’s name.

You can also get a business debit card, which makes it much easier to make and track your business purchases. In some cases, you may also get employee debit cards so your employees can make purchases on behalf of your business as well.

Building Business Credit

You have a personal credit score, but you may need to learn that businesses can also have separate business credit scores. If you believe your business will grow, you may eventually want to apply for a business loan or business credit card.

Both loans and credit cards can help you build up your business’s credit, but if you apply for a business loan or credit card, most lenders will want to see that your business has its bank account before approving you. Lenders may not view your company as legitimate if you run all of your business transactions through your personal checking account.

Grow Your Business with STG Accounting

At STG Accounting, our team is dedicated to helping small businesses thrive. Our experts can handle tax preparation, 1099 filing, bookkeeping, and more. When you work with us, you can focus on what you do best: running your business. To learn how we can help your small business, contact us today!