If you’re running a small business or plan on launching one it is imperative for you to have a business checking and savings account that is separate from your personal accounts. Last month, in 5 Ways To Create Money Habits a commentator asked me to dig deeper into this topic matter.
To be honest, there are only a couple reason why you need to separate your finances and they all evolve around legal reasons.
Keeping all your money in one basket is the quickest way to be audited and have legal issues arises with your business. Think if you’re a sole proirteriship you are opening yourself up to be sued and they take everything they won from you in their lawsuit from your personal accounts. This is why its imperative the moment you consider taking money from people for a product or service you set up your legal entity such as an LLC.
Business Expenses
When your business has an expense or need that should come from your business checking out. The money that is in there is coming from your business right? You shouldn’t be paying for your business needs out of your personal checking account. I tell new business owners 50-60% of the company revenue should be going back into the business. Reinvest in your business growing by buying the necessary items and service needs.
Saving For Business
There is a couple roles your business savings account plays into. One of them is your company taxes. Uncle Sam is going want taxes from you a couple times a year. The best advice my accountant gave me was to make sure I put away 30% of my monthly revenue to cover taxes on a quarterly and yearly basis. Nothing, worse than finding out you have a $1500 tax bill that is due and you’re looking lost because you dont have it. Another reason is for business life expenses. Last year out of nowhere my trust Macbook pro died on me in a meeting. Literally, I went to the nearest Best Buy and purchased a Macbook Air with no worries.
Literally, outside of the legal repercussion that could happen its just business smart to have separate accounts. Highly, doubt the Mark Zuckerberg has his personal money tied to his business account. The CEO of Nordstrom cant just go into his personal account to pay for business needs. Yes, those companies are way bigger than yours but aren’t you striving to be a successful business owner with high revenue stream?
