The Benefits of Setting Up a Business Bank Account for Your LLC
If you’re running a Limited Liability Company (LLC) – congrats! Operating under an LLC is one of the most popular business structures in the world. Not only does this structure limit your personal liability, but it also safeguards your personal assets in case your business is sued. However, did you know that opening a business bank account for your LLC could be equally important? Let’s take a closer look at why this is so.
Improved Financial Management
One of the primary benefits of opening a business bank account for your LLC is improved financial management. When your personal finances mix with your business finances, it can become challenging to determine how much money you’re using for your business and which transactions are personal expenses. Mixing funds can result in disaster, especially since the IRS might disallow business expenses come tax time.
Setting up a separate business bank account allows you to track all of your business transactions in one place. This will help you at the end of the year when you need to prepare financial reports and file taxes. Some banks might even offer free tools like budgeting software to help you manage your finances better.
Professional Appearance
Another crucial reason to open a business bank account for your LLC is it gives your company a professional appearance. It’s important to note that a professional appearance is not just about how you dress or how you present yourself. It’s also about how your customers perceive your business. Using a personal account for your business might make you appear unprofessional, and that’s certainly not the impression you want to leave with potential clients.
In contrast, having a dedicated business bank account shows that you’re serious about your company. It demonstrates that you’re working hard to build a reputable business and succeed in your industry. In turn, clients will take your business more seriously and view it as trustworthy.
Separate Legal Entity
Remember that an LLC is a separate legal entity from its owners. This means that your business has its own tax identification number or federal employer identification number (FEIN). A business bank account is essential for obtaining a FEIN, opening a merchant account, processing credit card payments, and even applying for loans.
Keep in mind that when you open a business bank account, you’ll have to provide your EIN and other documents to prove that your business exists. However, once you’ve done that, you can link your business bank account to other accounts, such as PayPal or Square, to accept credit card payments and save yourself PayPal or Square fees.
Tax Benefits
Finally, opening a business bank account for your LLC can offer significant tax benefits. You need to remember that each taxable entity has a separate tax threshold. This means that mixing personal and business funds could lead to less tax relief for your business.
If you keep your business expenses separate, you can catch tax deductions that you might miss if you don’t have an established system for storing receipts and invoices. During tax time, you won’t have to sort through loads of personal expenses to find out what’s deductible, which can save you heaps of time and stress.
Conclusion
As you can see, there are numerous benefits to opening a business bank account for your LLC. It allows for improved financial management, presents your LLC in a professional light, ensures legal compliance, and offers tax benefits. If you haven’t done so already, make sure to visit your local bank and open a business bank account for your LLC.
