Starting a Business? Reasons Why You Should
Open a Separate Business Bank Account
If you are going through all the steps and trouble involved in opening a business, you may be tempted to keep opening a business bank account on hold. After all, there can be several other tasks that will be far more critical for the operation of your business. It is easy to assume that you can ignore this task. But, having a business bank account can help you in many ways. It simplifies your accounting and establishes the credit history of your business. This makes it simpler to get loans. Here are some reasons for opening a business bank account pronto.
1. Tax preparation is made simpler:
If you have a bank account, your tax preparation is automated. It is a lot easier when all your business income and expenditure flows through the bank account. It is possible to link the business bank account with your tax preparation software. Whether you hire a professional for this or do the work yourself, you will end up saving yourself a lot of time and headache involved in parsing through the finances when it is time to pay taxes. There is no need to try and figure out which of the expenses were personal and which were business-related.
2. Bookkeeping can become automated:
A good bookkeeping software allows you to manage your accounting, bill payments, invoicing, and budgeting. It makes running the business finances a lot easier. With your business bank account maintaining your business and personal expenses separate, it is possible to sync the bookkeeping software with the bank account. This will automate almost all the things related to bookkeeping. As your bookkeeping software is synced with the bank account transactions you can monitor the financial health of your business instantaneously.
3. Protects from business debt liabilities:
One of the advantages of establishing your business as a limited liability company or a corporation is that if your organization becomes liable for a debt, creditors cannot go after your assets unless you have broken the law. But, if you mix the personal assets with your business assets and there is no separate business bank account, this protection is practically non-existent. A judge may hold you liable for the business debts. You may end up losing all things you own.
4. Shows to the IRS that you are serious about your business:
When you are looking to get your business expenses to count as tax deductions, the business has to be a legit one and it must not be a hobby. For legitimizing the business, IRS has to be able to decide if you are putting in the necessary efforts for making it profitable. For deciding if you are running a legit business for claiming the deductions, the IRS will take into consideration whether you are carrying out the various business activities professionally and maintaining the proper records and books. One of the ways of doing this in Hong Kong is by opening a business bank account in one of the Hong Kong banks there.
5. Establishes your business credit:
When you have a business account in one of the local banks it establishes a relationship for credit. Lenders use the credit history of a business while figuring out if they will lend you the money or not. If you are looking to get a loan for hiring more employees, for financing new equipment, moving to a larger space, or for some other purpose to expand the company, you will need a favorable credit history. It is extremely useful for getting money with decent interest rates. Without proper access to credit in the form of credit cards, bank statements, and lines of credit it is tough to buy for your business.
If you are an entrepreneur, you probably have a full plate. But, by opening your business bank account it becomes easier to manage the finances and save time in bookkeeping, paying taxes. Due to this reason alone, it is worth the effort. The business bank account is also helpful in getting loans and protecting you from creditors and IRS. You will appear more like a serious and professional business owner. Therefore, if you haven’t done this already, open a business bank account today.