Three Reasons Why You Need A Business Bank Account

Are you a business owner? Do you have a business bank account? If you don’t, PLEASE read this: Mixing personal and business assets is a commonly overlooked area for many small business owners.The technical term is commingling your assets and it is the practice of mixing personal and business finances, using one account for both, and not keeping a clear separation between the two. This is a dangerous habit that can cause numerous problems for your business. Here are some reasons why commingling personal and business assets is bad and why you should avoid it.

Lack of Clarity

Commingling personal and business assets can make it difficult to track and record business transactions. It can be challenging to differentiate between personal and business expenses, which can lead to inaccuracies in financial records. This, in turn, can make it difficult to prepare accurate financial statements, calculate taxes, and assess the financial health of the business.

Legal Issues

The commingling of personal and business assets can have legal ramifications. In the event of a lawsuit or bankruptcy, your personal assets may be at risk if you have not kept them separate from your business assets. Additionally, commingling assets can make it difficult to establish the legal identity of your business, which can make it challenging to obtain loans or credit in the future.

Tax Implications

Commingling personal and business assets can also have significant tax implications. It can be challenging to identify business expenses when they are mixed with personal expenses, which can result in missed tax deductions or the overpayment of taxes. Additionally, if you are audited by the IRS, commingling assets can make it more challenging to prove that certain expenses were legitimately for business purposes.

Establish separate bank accounts, record-keeping systems, and credit cards for your personal and business finances. This will help you stay organized, reduce stress, and protect your personal assets. By keeping your personal and business finances separate, you can ensure that your business is healthy, prosperous, and protected.