If you have decided to venture out on your own and establish a small business or an entrepreneurship, it can be hard to separate yourself from the business entity at first. In essence, you are the business entity. However, when it comes to money matters, it is important to know from the start the importance of separating your personal financial matters from your small business ones.
Establishing Your Business Bank Account
One priority you should consider when dealing with money for a small business is to set up a business bank account rather early in the process. You may have to bootstrap the entire business startup, but the earlier you start separating your funds, the better off you will be in the long run.
Your bank account for the business will still require your personal credentials. If you have poor credit or a bad banking history, you may not be able to set up a traditional bank account on your own. It will be important to get your financial act together before venturing into a business.
The business account will likely require a trip to the bank to sign forms and provide proper identification. Online banking accounts may also be established, but you may need to provide the bank with business documents as well as your own personal information including a Social Security number. If the business is anything besides a sole proprietorship or an LLC, you may need to wait until your business is legal to send in the appropriate documentation necessary to open a larger business account.
Why Business Banking Matters
There are several reasons the establishing of a business bank account is important. Four factors in particular makes this part of the business startup process an important one. These factors include:
- Separation of Business Details – In order to keep your business on track, you need to be able to account for specific business-related expenses to determine your financial strategy moving forward. If you are unable to tell which expenses were personal and which were for the business, you’ll likely spend a lot of time sorting through details and organizing your information. Come tax time, you may seriously regret your decision to not keep bank accounts separate. You need to maintain an accurate account of business expenses at all times and it matters just as much in your personal life too.
- Establishing Credentials – By setting up a bank account for your business, you are starting on a path of developing a history for your business. This may notmatter as much to you now in the early stages of a business startup but as the business progresses you will come to rely on the credentials a business bank account provides. It will be necessary for securing financing, credit, and a financial history for your business as it grows. A bank account for your business also can help you achieve credit with vendors, suppliers, and other entities your business relies on. Many of these connections will require bank account information on applications for credit.
- Solidifying Your Business Image – As a business owner, it is important to continue building your professional image and the image of the business. It can increase your credibility and reliability to issue checks from your business rather than from your personal account. Along with separating personal funds from the business, being able to write checks on your own business account is a more logical way to keep track of expenses while proving the professional image of your business to other individuals and businesses.
- Preserving Your Privacy – Depending on the nature of your business, you may need to send out a lot of information concerning your financial life on behalf of the business to individuals and the public in general. It is logical to protect your personal information including your Social Security number, your personal bank account information, your home address, and the like. By having a business account, you can maintain your privacy while still tending to the financial responsibilities of your business.
Even if you are funding your small business in its entirety from your own pocket, it is important to open a bank account as soon as you get the ball rolling. You will be glad you invested the time in effort into establishing a separate financial account for your business.
Make sure to compare the various business accounts being offered from multiple banking institutions. You want to ensure the account fees are affordable for the business and the services offered by the bank are compatible for your business needs. You may want to consider opening a business account where you have your own personal account as you can get a better deal as a loyal customer and it will be easier to transfer funds between accounts. However, make a decision after doing your research in order to establish the right account for your company.