Sidehustling? 4 reasons to separate your personal and business finances
(NC) Whether you’re already running a side business or have made this a goal for 2019, here are four important reasons why separating your business and personal accounts is best practice to set yourself up for long-term success.
- Credibility. The first thing people usually look for in a business is that it is professional and trustworthy, especially when it comes to the exchange of money. Customers and vendors alike want to feel confident they are dealing with a reputable entity, and eTransfers to your personal account may seem unprofessional and even disorganized.
- Keeping business finances separate helps to formalize your company and give it an independent identity. It also allows you to easily produce credible financial documents that are connected to a business-related account. This is especially important when developing relationships with banks, investors or other third-parties.
- Taxes. Keeping finances separate not only saves you precious administrative time as an owner, it’ll reduce your bookkeeping costs if you can give your accountant less to unravel when it comes to receipt and expense reconciliation. There are also legal and financial risks attached to mixing personal and business finances. For example, incorrect deductions on your tax return can result in fines and penalties, and audits will be extra work if you don’t have proper documentation.
- Proper tracking. The financial picture produced by a separate business account will help you easily identify initial start-up costs such as business licenses, equipment, inventory, office or store-front and marketing costs in one place. On an ongoing basis, a business account will also make it easier to manage cash flow and expenses and keep track of how your business is performing.
Fortunately, it’s easier and faster than ever to open a business account. Whether you’re at home, on the road or sitting at a coffee shop, RBC’s online application allows you to set up a business account in less than 15 minutes. Find more information at rbc.com/notbau.