By - July 17, 2020
Categories: Banking, Cash Flow, General, Taxes
Many small businesses use the owners personal checking account for all of their business transactions. This can cause problems when it comes time to balance the books, pay taxes, and create an bookkeeping nightmare.
Piercing the Corporate Veil
Another, perhaps more critical consideration is that using a personal account for business has the potential of opening your business up to invasion of the corporate legal protection you may have in place. That LLC, S-Corp, and/or C-Corp may become worthless.
With a business bank account, “piercing the corporate veil” is less likely to happen. You’ve invested in having the proper legal protection in place, a proper business bank account should be walking hand-in-hand to enhance that protection.
You’ll read more later in this article about other reasons why a business bank account just makes good sense. Here’s another benefit you may not be aware of.
Tax Deductions
Consider transitioning to a business bank account. The fee schedule may be a bit confusing and appear expensive, but are you aware that those banking fees are a deductible expense on your taxes? Yes, the IRS allows you to lower your taxes by deducting banking fees.
Having a dedicated business bank account makes bookkeeping much more streamlined and takes less time. Time = $$ so let’s see how you can keep more cash.
Not having to separate mixed personal/business expenditures saves your bookkeeping pro time. Having to sift through and separate personal expenses from business disbursements is time consuming. How would you like to lower your bookkeeping costs?
Knowing that 100% of the deposits and expenses are business related will put a smile on your bookkeepers face and keep more cash in your business account. She can work efficiently and do her very best to keep your books happy too.
Imagine her finding additional deductions because she has time to research the tax code and add value to you, her client.
Does that sound like a win, a win to you?
Better Accuracy
Is accuracy of your account and bookkeeping important to you? Of course it is. Your bookkeeper does her best to maintain your books as accurately as possible. That is what you pay her for.
When using a personal account for your business, it can make cash flow accounting very challenging. Separating co-mingled funds into personal and business categories is tedious and can cause questionable accuracy.
Cash is King and knowing precisely what your business cash flow amounts are is very important. A business account solely dedicated to business cash flow is optimum and ensures accuracy taking away any questions about business cash flow and personal cash flow.
Can you see your bookkeeper smiling? Look in the mirror, you should have a smile on your face when you read the invoice for bookkeeping services.
Sticking with accuracy, let’s shift and address everyone’s favorite subject, taxes.
Accurate Taxes
Accurate tax accounting is very important. Your bookkeeper want you to keep as much of your hard-earned income as you can, and you can help her with this.
Using a personal account means additional time sorting through receipts and bank statements to ensure all of your deductions are in the proper categories on your tax return. There is a possibility that some receipts may be questioned and perhaps not included on the tax return.
The extra work costs more money which reduces the value your bookkeeper can provide to you.
The misplaced deduction will increase your tax burden.
I encourage you to make the shift and open a dedicated business bank account today.
You’ll be smiling and your bookkeeper will be smiling too.
