Some Pennsylvania small business owners may find it redundant or unnecessary to open up a bank account strictly for their business. Why go through all the trouble of setting up a new account when you can use your existing one to write checks and receive deposits? However, in reality, setting up a business account is both a wise and in many cases the legally prudent move.
Chron.com points out a having a business account can work wonders when it comes time to organize your expenses. Remember that you have to track expenses for the purposes of filing your taxes, and you would likely find it a major pain to have to separate all of your personal expenses from those related to your business. The mere fact that you have a bank account devoted to your business lets you know that everything in that account pertains to your company.
Also, with a separate account, you can more easily organize your expenses by type. You can trace the billing invoices you have sent to clients and determine what has been paid. It will also be more effortless to track what you have paid your employees every pay cycle. Keep in mind that you have to pay withholding taxes for your employees, so you want your accounting process to be as simple as it can be.
Additionally, you can determine how well your company is performing by looking at the revenue your business account receives. If you find a general dip in revenue, you can figure out when you experienced the downturn. You might find your company performs weaker during certain months of the year and stronger during other periods. You could also check your sales to see which of your products and services are performing the strongest and which are lagging.
A separate business account also helps keep the IRS from looking at your business with a suspicious eye. As Forbes points out, mixing your business and personal monies can look strange, and you might receive a notice from the IRS asking you questions about it. Some business structures necessitate a separate account anyway, so you could invite legal trouble by mixing your personal and business transactions, especially if you are trying to limit your liability with an LLC or other business structure that is supposed to be separate from you personally.