It’s easy to just slap together a home business and not think that much about where your personal finances and business finances should separate. The extra bank accounts can seem like a bit of a pain. It’s all you after all, riiight?
Nope. Not exactly.
Make Your Life Easier at Income Tax Time
If you keep your business expenses separate, that’s going to make your life a lot easier when you file your income taxes each year. You’ll have a more definite indication for what was a business versus a personal expense.
Having separate personal and business accounts also looks better to the IRS in case of an audit. This can be important. You want to be able to show that the business deductions you made were indeed legitimate business deductions. It also shows that you are more serious about your business, and aren’t treating it as a hobby.
It’s really not hard to open up a business checking account. You can probably do it at the same bank you have your personal account at. They may need to see your business license or other proof that your business name is a name you can legitimately use.
You may also want to consider a business credit card. It makes it easier to make payments for business expenses such as website hosting online and keep track of it as a business rather than personal expense. A business credit card is also good for building a credit history for your business that is separate from your personal credit history. You may or may not ever need credit for your business, but if you ever need it you will really want it.
Your personal credit score is usually used to determine whether you can get business credit for the first time, but once you have a credit history established in the name of your business, future credit decisions for your business can be made based on that history.
Look More Professional
Being able to make and receive payments in the name of your business looks more professional than getting them made out to you personally. It especially looks better if you have clients you’re dealing with. It may not matter as much if you’re getting payments through PayPal where the only thing people see is your email address. That’s a reason to have a professional looking email address. But for other kinds of payments, it really is better to look as professional and serious about your home business as possible.