Its very convenient and easy to keep your personal and business finances in a single account; however, this has several disadvantages. Indeed, opening different accounts for the two can prevent you from so many unnecessary hassles.
Why Open A Corporate Bank Account?
Professionalism – Having a business bank account will give credibility and professionalism to your firm. It shows you are serious and ready to thrive in the business world. If clients see that you are using personal accounts for transactions, they may assume that you are running an illegal business. Companies have lost the opportunity to do business with big organisations based on this.
Consistency – Using a corporate bank account discourages your employees from giving out personal bank accounts to clients for payment. When clients are used to paying your organisation through personal accounts, it is very easy to collect payment through alternative accounts thereby encouraging unethical practices. To be consistent, it is a lot better to open a separate bank account in the name of your business. After all, the business an entity on its own.
Expansion – Having a business account puts your business in a better position for growth. Banks and investors usually monitor account turnover and activity pattern. You are in a better position to receive bank loans and financing when your business needs to expand.
Protection from legal liability – Opening a business bank account will protect your personal assets against any legal liability. When your company gets sued and you are keeping your company and personal finances in just one account, the court might go after your personal assets since your bank account does not reflect 2 distinct entities. In fact, if the court decides to go after your companies assets, it is difficult to tell what belongs to the company and what belongs to you personally.
Tax purposes – Another excellent benefit of opening a separate account for your business is that it will be a lot easier for you to file business income and expenses for tax purposes. In recent time where tax authorities would ask for your bank statement to back up expense and revenue items list in assessment forms, it would be difficult to separate personal activities from business activities. Tax might be levied on personal monies.
Points to consider before choosing a bank
In Nigeria, having a personal bank account does not mean that you will not easily open another account for your business. Your current bank might not necessarily be the best one of for your business. It is important to bear in mind that banks specialise in various areas. A bank may be focused on saving savings and loans while another is focused on micro, small and medium scale enterprises.
For business purposes, a savings account cannot be opened, therefore, you need to open a current account. Before deciding on the bank that would handle your business transactions, consider looking into different financial products. These include cash management and the different lines of credit. If you find a bank with extensive knowledge and experience in dealing with companies similar to yours, this may be the best bank for you as well.
The banking cost is another crucial factor to consider if you are choosing the best bank. Most banks today allow companies to open accounts with a certain amounts. While some require a minimal amount of balance. Sooner, the needs of your business might change and you may need to evaluate your account according to your fees along with the convenience the account offers. If you choose to upgrade your account, this may lead to higher fees. Remember though that these might be offset by the ease in dealing with the increased volume of transactions. Ease of access to added services from the bank may offset such high fees as well.
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