Having a business bank account provides many benefits for small business owners and is essential in the growth of a business. Not only would having a business bank account make the bookkeeping less of a hassle to do, but it can provide the business with an advantage in areas such as financial planning and liability protection. Here are four reasons why every small business should have a business bank account that separates their personal expenses from their business expenses.
1. Liability Protection
Liability protection is one of the main reasons for having a business bank account. A business that is registered as an LLC or corporation does not automatically have protection over personal assets if the business is facing legal trouble or cannot pay off a business debt. In order for the personal assets to be protected, personal finances need to be separated from the business finances, which can be done when a designated business bank account is open.
2. Financial Clarity
A business bank account that is separate from a personal bank account provides the business owner with financial clarity because it is easier to track revenue and expenses without having to constantly review which transaction is for personal use and which is for the business. The business owner would be able to streamline the bookkeeping process, and it would be much easier to identify business expenses for tax deductions.
3. Establishes Business Credit
When a business opens a business bank account, it enables them to establish business credit by setting up terms with suppliers and vendors. Setting up terms with suppliers and vendors means that you can make payments within a certain period of time, usually 30, 60 or 90 days. When you make those payments on time, they are reported to business credit reporting agencies, which helps establish business credit without even needing to use a business credit card.
4. Professionalism
Customers are more likely to trust a company when payments and transactions go through an account with the company’s name on it. In addition, it enables companies to set up various payment options such as credit card processing and online invoicing, improving customer satisfaction.
Every small business should consider opening a business bank account due to its numerous advantages. The liability protection and financial benefits that it can provide is important for the long-term growth of a business.
