Running a successful business is hard enough, and one wrong step can derail it in an unfortunate direction. Many businesses build a strong foundation with the right techniques, approaches, and people which helps them stay ahead of the game.
Though there is no written rule stating that a business cannot use a personal account for conducting business, it is recommended not to do so. There may be exceptional cases where using a personal account is permitted but it is not encouraged.
If you are planning to conduct business or are already running a business with a personal account, here are a few demerits that you might face if you don’t consider business account opening.
Personal And Business Get Mixed
For people running a business with a personal account, their business and personal transactions can get mixed. A business has to spend on production, supplies, salaries, rent, utilities, etc. If one uses a personal account for this, it can become extremely difficult and complicated to separate them.
There might even be a limit on the amount of money you can spend or receive on a personal account. Since businesses deal with a larger capital, a business account serves as an optimal option to keep the expenses and profits in check.
Tax Obligations Become Difficult
During the tax season, personal accounts can become a nightmare. Auditing will take forever, and producing the right records will be extremely difficult. Even if your finance team does the best work, there is a chance that you won’t be able to file taxes or get the tax benefits properly.
The spendings and earnings might get mixed and not reflect correctly during audits. This can be very risky and get your business in trouble if the tax obligations for business in your country are not complied with.
Bank Loans Become Inaccessible
The financial world works differently for businesses. There are a number of services like credit cards, loans, investment opportunities, etc. that are exclusively or more readily available to businesses than individuals. If your business is working on borrowed capital or plans to take a loan in the near future, it might get rejected if you apply through a personal bank account.
Some banks issue a credit line or give a business loan only through a business account. If you don’t have a business account, you might not be able to access capital and other facilities like favourable interest rates, repaying plan, etc. that might prove as a disadvantage to your business.
Your Business Seems Unprofessional
Your vendors, partners, customers, etc. may see your business as unprofessional due to your personal account. They may assume that you do not take business seriously and may even refuse to make payments.
A business account with your business’s name on it builds trust among your partners and helps you build a brand. If you keep using your personal account for business transactions, there is a chance that you may start losing your clients or drive away potential vendors and customers.
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Expanding Your Business Becomes Complicated
If you have plans to scale your business to new heights, moving forward without a business account will be impossible. Whether you want to take it to new cities or even new countries, you will need to make a business account that aligns with your business plans.
You might have to deal with multiple currencies and cross border transactions. You cannot risk using your personal account in these cases. To avoid any legal obligations and ensure smooth business operations, it is recommended that you have a business account and choose the plan that suits your vision the most.
If you have a vision to build a successful business that operates with the best practices and focuses on building meaningful relationships with clients and vendors, you should not skip the business account opening process. Not only will your personal and business transactions be separated, but you will also find it much easier to comply with your tax obligations.
Your brand will have more credibility with its name attached to a business account and you are more likely to have access to business loans, business credit cards and other financial instruments. Hence, to avoid such hassles, you should make opening a business account a top priority in your business plan.
