When do you know if it’s time to get a bank account for your business? The moment you decide on opening your business, that’s when.
Once you’ve confirmed your business name, get an Employer ID number (EIN) and use that identification to open a business account (instead of your social security number).
When you are just starting your business, it might feel like it makes sense to run your transactions through your existing (personal) account, but eventually, you’ll have too many transactions to know what is coming or going.
You can collect payments directly into your business account, and then pay your bills direct from the professional account. Managing your cash flow is much easier when the funds are not mingled.
When you’re in business, whether you like to admit it or not, your image matters. Especially when you are a small business, you want to appear professional and experienced.
If you’re writing checks out of your personal account, you appear as if you’ve only been in business for a short time (even if you have been!) and this does not provide a lot of confidence for clients or vendors!
When your business name appears on checks and other payment methods, clients and vendors) know that you have the intent to be around for a long time.
Since the number of transactions is bound to be higher, you’re a more attractive target to online hackers.
If you have some sort of fraudulent activity in your business account you’ll be using your EIN as mentioned above rather than your social security number – adding a strong layer of protection to your personal financial life.
As your business grows, developing a relationship with a banker becomes increasingly important – they can guide you through what services and options their institution offer and what will serve you best.
For example, having an Operations Account, a Pre-Paid account, and a Savings account is an easy way to keep your finances straight, and your banker will be able to advise what type of account will be most beneficial for your needs.
Having a business banking account also provides you the ease of accepting credit cards – which your banker can help you set up.
You cannot accept credit cards with a personal bank account. Sure, getting paid in cash is preferable in order to avoid the transaction fees, but some clients love the points they accumulate with their credit cards, and in other instances, it will provide you with payment faster than waiting on a check will.
A business account makes accepting credit card transactions seamless, which is exactly what you need.
Finally, having a separate bank account allows for much easier tax preparation. Separating business and personal expenses can be complicated.
You don’t want to miss business expenses and the tax deductions they provide…and you definitely don’t want to pay your tax preparer the HOURS of time it will take for them to separate personal/professional expenses and the multiple questions you’ll have to answer/recollect.
Make sure it is on the top of your list when starting your business. And if you’ve already had your interior design business for a while, and don’t have a professional bank account – it’s time to do so.