Is Opening a Business Bank Account Necessary?

Is Opening a Business Bank Account Necessary?

As a freelancer or a small entrepreneur, you may face a great deal of overlap between your personal finances as well as business finances. Apparently, having only one bank account may seem to be easier.

Nevertheless, there are many reasons why you should split your business finances from your finances. Besides being able to separate the business finances from your private assets, you can keep your tax reports well organised if you possess a business bank account. That is not all. Listed below are reasons why opening a business bank account is vital for your company.

You Have Higher Trustworthiness To Your Paying Clients

When you run a business, paying your contractors with a personal cheque or have your customers issue a cheque to you as an individual can make you seem to be a little improper. This might not be a deal-breaker.

However, possessing an assigned business banking account increase the credibility of your business when you handle your growing business and develop gradually from freelancer to an entrepreneur.

On a side note, you don’t lawfully require another bank account for your company if you are operating your company as a sole proprietorship (Also see 10 Concerns To Address Prior To Beginning Your Business), but it is still advisable to have one. Possessing a business bank account can prove that you are running a company, as well as are qualified to deduct your business expenditures should you ever be audited.

You Can Keep The “Corporate Veil” Flawless To Safeguard Your Assets

A lot of small business owners set up a corporation because it helps in protecting their assets from some incidents that could occur in business (Also see Importance of Soft Skills in Business). As an example, if someone sues the company or it is unable to settle its debts. People often call this a “corporate veil” as it separates the entrepreneur from his business.

If you want to maintain that personal liability protection, you have to keep your corporation properly. To achieve this, splitting your finances and business finances from each other is a must. By opening a business bank account, your company is its entity, and it splits from you as a person.

Furthermore, if your company is sued before, the complainant might make an effort to penetrate your corporate veil by revealing you have not operated the corporation according to what is written in the law accurately. In this situation, they may go after your private assets. In such cases, corporations need to keep personal finances and company finances entirely separated.

You Remain Organised When Tax Time Comes

Managing the tax related tasks internally without hiring an accounting firm in Singapore can be something tough. However, you will encounter more troubles than you think if you merge your business account and personal account (Also see How To Organize Your Accounting Records In Singapore?). Mostly, you will find it tougher to keep your books well organised when tax time comes if you have combined accounts.

You might be spending a lot of time reviewing all your transactions in the past few years (Also see The Importance of Accounts Payable Process), which may include your home’s water bills and tuition fees of your kids, as you want to determine which of those are business expenses to cross them out. Possessing separate accounts makes the process of keeping records easier, and this helps you to save time as well as guarantees that you would never overlook any legal deductions.

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