01 Nov Personal Vs Business Account: Which to Use and Why
Tax time can be stressful for business owners and self-employed people, especially when it comes to tracking expenses. Everyone has expenses, but it’s important to have some way of tracking them, which you can read more about here.
The focus of this won’t be on expenses, but on a way of managing money as a business owner.
Personal Vs Business Account
You’ve probably heard of people using personal bank accounts or bank accounts. Personal accounts are those where all transactions are related to a person’s personal life. Business accounts are used for transactions relating to ONE business.
If you’re wondering which to use, the answer is both.
Many clients come to us, saying that their expenses are contained in their bank statements. They, then, hand us a statement of one account that was used for both personal and business transactions. There is no way of tracking which is which, and any results would be guesswork at best.
A business owner, to claim the most in business expenses, must have separate bank accounts. Not only does it make tracking those expenses much easier, but it also makes money management easier. You won’t wonder if you’ll have enough money for a new office chair and groceries if that money is already separate. It gives us a much clearer picture of your entire finances.
The One-to-One Rule
Something else you may not know about the personal vs. business account discussion is what we like to call the one-to-one rule. Most of our clients are realtors, who have a single business, so we recommend one personal account and one business account. However, some people own multiple companies, like how we are both Tax Defense Ohio and Realty Income Tax Advisors.
In that case, you should have one business account for every business you own. If you have three businesses, then you should have three business accounts. You business to business account ratio should be one-to-one. Because every business will file taxes at the end of the year, having dedicated accounts make expense tracking process much easier.
Have further questions about personal and business accounts? Call us today at 614-524-4888 or message us on Facebook!