Do You Need an Internet Business Bank Account?
A commonly overlooked issue when working online is whether or not an internet business bank account is necessary. Setting up an additional bank account can seem like a trivial detail, especially if you are earning income as a sole proprietor and have not set up a separate business 6207.1entity. Here is a closer look at some of biggest reasons that you will benefit from setting up an internet business bank account that is completely independent from your personal accounts.
If there is a single "big" reason that most people end up creating an internet business bank account it is for tax purposes. In the United States, there are a wide variety of tax deductions that you can take if you are running your internet business from home, which is what most people start out doing. You have the ability to deduct things like a portion of your rent, utilities, and other related expenses. With so many potential tax breaks, some people who are not actually running a business will still try to claim them, stating that a certain hobby that they have is actually a business. By opening a bank account that is only used for business purposes, it is much easier to prove that you qualify for these types of tax breaks.
Another benefit of setting up an internet business bank account is that it will be much easier to get a clear picture of your business. If you are paying bills from your personal account, it is easy to mis-classify transactions. This is true both for income as well as expenses, especially if you are sharing your bank 6205.1account with someone else such as your significant other. Without a clear set of financial data to work from, it will be impossible to get a complete picture of how successful your online business really is.
By using a separate bank account for business purposes, you also get an added layer of safety covering your personal accounts. If you are accepting any form of direct payments, especially bank transfers, direct wire transfers, or direct deposits, then there is always a chance that your information could be stolen. If you are using the same bank account for everything than the risk of getting you or your businesses identity stolen can be comparatively high. On the other hand, if you are using multiple accounts, including one dedicate to only business transactions, then you are spreading your risk to multiple accounts. If your information does get stolen, it will normally only be one account not all of them. This means that multiple 6204.1 accounts provide a higher level of overall safety.
If you are planning on taking your online business seriously, then setting up an internet business bank account makes sense. There are a number of benefits that you can gain from a separate account such as tax benefits, financial clarity, and safety.