Starting a business can come with multiple challenges, including money issues you might not anticipate. Financial hiccups often stem from lack of organization — which can be solved by keeping personal and business finances separate.
If you are starting a business, the first financial move to make is to separate your accounts. There is a difference between a personal checking account and a business checking account. A personal bank account is just that: money earned and spent for your personal use. There needs to be a separation of your business funds and expenses. Trying to pay business bills from your personal account can be unorganized and unproductive. A checking account dedicated to your business will provide a good picture of your finances.
Business owners should have a separate account that is solely used for the business. The structure or legal entity of your business may require a separate account. Sole proprietorships, LLC (Limited Liability Corporations) and Corporations are a few examples. A separate account can add a layer of protection to your personal identity. Business accounts typically have a lot of transactions, which can lead to identity theft. A separate business account could safeguard your personal finances.
To open a business bank account, you’ll need a business name that is registered with your state or province. Check with the individual bank for which documents are needed in your initial appointment.
The foundation of solid business bookkeeping is effective and accurate expense tracking. It’s a crucial step that lets you monitor the growth of your business, build financial statements, keep track of deductible expenses, prepare tax returns and legitimize your filings.
From the start, establish an accounting system for organizing receipts and other important records. For U.S. store owners, the IRS doesn’t require you to keep receipts for expenses under $75, but it’s a good habit, nonetheless.
It is important to pay attention to what kind of business account you’re looking to enroll into. You want to find an account that will work with the size of your business today and in the future. Pay attention to minimum balance requirements and monthly service charges. Shop around for business accounts and compare fee structures. Most business checking accounts have higher fees than personal banking, so pay close attention to what you’ll owe. Be sure to ask about online banking platforms. You want a bank that has the technology for your business. As a business owner, time is money.
Kim Dees is a senior vice president and Southern Arizona division manager for WaFd Bank.