When you first launch your business as a sole owner, it may seem convenient to use your personal bank account for the transactions. If you add a separate bank account for your company, it will provide you higher levels of tax incentives and asset protection while increasing the reliability of your business.
When you do your daily bookkeeping, you might feel both of your personal and business transactions are in place but solely relying on daily bookkeeping is not the best idea. There are other benefits of having a separate account of your sole proprietorship company, which are:
The Tax Benefits
Out of the most significant advantages of opening separate savings and checking accounts for your company is the tax benefit. If you keep all of your payments on your individual account, it can cause a headache when tax time comes. Even if you practice daily bookkeeping, one small issue can lead to redoing all the process.
Come tax time, you should be able to identify the business use of your personal automobile, capital expenditure, insurance costs, employees’ pay, interest on business loans and rent expenses. It is better if you speak with a tax professional to make sure that you are in for the greatest possible gain.
Your personal assets
Keeping your business and personal finance separated will help you preserve your personal property or assets if something happens to your company. If you do daily bookkeeping, your personal asset might still be separated from your professional asset but not in the time of crisis. For accomplishing this, multiple small businesses modify themselves into a Corporation or an LLC. This will help you to preserve any property you own from creditors and lawsuits, in some situations, possibly even lessen your company’s taxes.
Build and strengthen your company’s brand
When your customer gets a bill under the name of your company, it supports to strengthen the integrity of your brand. When you see that your account is charged from Issac Samuel, rather than Samuel Consultancy, you get confused and might as well flag your charge as fraudulent. Although you may not mandatorily require a separate business account for your sole business, it is a good idea to keep it separate as your business expands.
In conclusion, do you need a business account if you’re a sole proprietor? The answer depends on your situation and what you hope to accomplish.