Dedicated business accounts streamline accounting and taxes—and may be required by law.

Many start-up business owners get their enterprises rolling with personal bank accounts, but they shouldn’t wait too long set up dedicated business accounts. Here’s why.

Separate business accounts may be required

Even though sole proprietors aren’t required to have separate business accounts doing so can make their accounting much simpler because business income and expenses are already separated. At tax time, this can save hours of work.

Businesses set up as an LLC or corporation are required by law to keep their accounts separate. Not only does this simplify accounting, it could help protect one’s personal assets in case of financial loss due to debt or legal liabilities.

Accounting efficiency

Another reason for separate business and personal accounts is that they make your work easier. Parsing out business expenses from a personal account is tedious and time consuming. Using dedicated business accounts streamlines all your accounting processes from calculating cash flow to taxes.

Documentation for deductions

Any business expense that is both ordinary and necessary can be used as a deduction. While you’re not required to show documentation of expenses when filing taxes you do need to keep documentation to substantiate your claim. Business account statements showing things like bank fees and recurring subscriptions can serve as documentation without sharing personal information in case the IRS questions claimed deductions.

Setting up business accounts is simple

The process of setting up a business checking or savings account or getting a business credit card is similar to setting up personal accounts. For a business credit card, you’ll need to provide a bit more information about the business, including annual revenue and monthly spending.

If it’s time to set up your business accounts, check out our business services. Or, reach out to one of our commercial loan officers who work locally and provide the friendliest service around.

 

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