2020 was tough due to COVID-19. Many people lost their jobs this year.
Some people are still searching for jobs. Others are planning to launch their business. If you belong to the second league, then you have to do three things first.
- Decide on the legal entity of your business – Think and determine the type of business you want to have. Do you want to have a Limited Liability Company (LLC) or a sole proprietorship? Both have pros and cons. Analyze them and then make a decision.
- Set up a business bank account – Open a business bank account for your new entrepreneurial venture. This account will be used solely for your business expenses.
Today’s post is on the business bank account and how it helps to grow your company. So, let’s dig deep into it.
What is a business bank account?
A business bank account is used for all kinds of business expenses. Only entrepreneurs are eligible to open this type of account. Private individuals can’t open this account in a bank.
How does it help to grow your business?
A business bank account helps you grow your business and straighten your finances. Here’s how.
- This will help you avoid mixing business with personal expenses:
A business account deals with business funds and expenses. When a client makes a payment, it goes to your business bank account. You can check the revenue and expenses accurately. Your expenses and income remain separate. So, whenever an amount is credited to your business account, you know that it is a client payment. Again, when an amount is debited from your business account, you know that it is a business-related expense.
You can track your business income and expenses. Keeping your business account and personal account separate has one more benefit. We understand where your company stands financially. You can find out if your business monthly expenses were more than your budget or not.
- You can protect your personal and business assets in the event of lawsuits:
Lawsuits can have a direct effect on your financial situation. Suppose someone has filed a lawsuit against your business. If the plaintiff wins the case, then you may have to pay financial compensation to him or her. If you maintain a business bank account, then you can at least save your funds and assets. You can claim your business and personal assets separately. You have not used your funds to grow your business. So, the plaintiff or the court can make a claim only on your business funds. This is how you can safeguard your funds.
Likewise, you can save your business funds when a creditor files a lawsuit against you for credit card debts. Suppose you have stopped paying your credit card bills for several months. You have not used the consolidated credit card debt method or any other debt relief method to refund your creditors. As a result, creditors have gotten pissed off and filed lawsuits against you. If you don’t fight the case and lose it, creditors will get a judgment order against you. Their primary motive will be to garnish your bank account or wage.
If you maintain only one bank account for your personal and business expenses, then you are in great trouble. Creditors will levy money from your bank account and take money from it. It implies that you will lose your business funds also. However, if you have a separate business account, then creditors can’t touch your business funds. You can save your company from creditors.
Make sure your business has a proper legal entity. It will help you to safeguard your assets. Otherwise, if anyone files a lawsuit against you for illegal business conduct, then he or she can try to snatch your home or any other personal property.
- You may have the opportunity to build business credit
You need money for your first entrepreneurial venture. But it is tough to qualify for business loans. A business bank account helps to build credit over time. Moreover, when you open a bank account, you may start getting business credit card offers. However, the credit limit will be based on your creditworthiness.
A business credit card helps you to build a positive credit history when you pay bills on time. That credit history may help you qualify for business financing later.
- It will be easy to file your business tax returns
When you have a business bank account, it becomes easy for your accountant to file your tax returns. The accountant can make all the necessary calculations promptly. The accountant can do his or her job and claim back your entitlements. Business audits can also become simple.
- It creates a good impression on the customers
Your business image matters for the success of your entrepreneurial venture. When you create a business account, the bank will issue business checks. Your business name will be engraved on the checks. This will send a message to your customers that you are serious about your business. You are here for business. Your clients get the confidence to work with you.
What should you keep in mind when choosing a business bank account?
Are you all set to open your business bank account? If so, then here are a few things you should look into before opening an account.
- Banking fees: Nothing is free in life. You have to pay a fee for all the financial transactions. Several banks charge a small fee for each transaction. Others charge a monthly or quarterly fee. So, you have to shop around and compare fees charged by the banks. Many banks don’t charge any fees during the introductory period. You can also consider those banks
- Perks and benefits: Check out the facilities you can get from the business bank accounts. Do they offer deals on credit card payments? Do they provide cash management services? What other perks and benefits can you get from the bank?
A business bank account can help you grow your business. They can help you track your expenses and file your tax returns. Plus, you can qualify for business credit cards too.
Bio- Aiden White is a financial writer who lives in Dudley, Massachusetts. She started her financial journey in 2015 and has been associated with consolidatecreditcard.org for the last 2 years. Through her writing, she has inspired people to overcome their credit card debt problems and solve their personal finance based queries. Being a debt fighter in her personal life, her goal is to share innovative thoughts and knowledge in the debt communities. Get in touch with her at firstname.lastname@example.org.