Do I need a business bank account?

When starting a business, some commonly asked questions are “Which bank should I choose?” and  “Can I use my personal bank account for my business?”​

In this blog, we’ll talk about:​

If you operate as a sole trader, you're not required to have a separate business bank account. However, we recommend setting up a dedicated account for your business transactions. This can simply be another account under your name with a different prefix.​

If you’re operating your business through a different business structure (partnership, trust, company), the ATO requires you to set up a business bank account for accounting and tax purposes.​

Although it may seem like setting up a business bank account takes more (admin) time, a separate account will save you money and time in the long run. Think about the time spent separating personal transactions from your business transactions. If you hire an accountant to do your accounts, this will also mean they will take longer to sort out your accounts, thus, a higher bill (unless you’re paying fixed costs, like with Beany!). ​

Here are some clear benefits of using a business bank account:​

When the tax season approaches, a separate business account will help you to show a clear financial picture of your business. If you have your personal and business expenses intertwined, this means you (and your accountant) will spend hours going through bank statements, receipts, and other accounting records to find each business-related transaction. You’re not making a good use of time, but could be missing tax deductions you’re eligible for due to human error. ​

Besides, using a business bank account simplifies the process of estimating how much tax you need to pay to the ATO. These taxes include GST, income tax, FBT and more. For example, if you’re required to file a business activity statement (BAS) quarterly, then identifying personal and business transactions will be a regular pain each quarter. Of course, you can hire an accountant or a tax agent, but this means their bills can go up too!​

Read more: 7 top tips for business owners should know to reduce your tax bills​

A small business often starts as a hobby or a side hustle, such as an Etsy or Amazon store. But having a business bank account adds professionalism and credibility to your business. You will be more likely to gain customer trust if you conduct business from a business bank account that uses your business name. Besides, it helps to get your brand name out there.​

You may not have had the long term growth of your business in the forefront of your mind when you first started your business but having a business bank account gives you more options for growth opportunities such as securing funding from investors, getting a business loan or line of credit. ​

A business bank account allows you to demonstrate a clearer picture to potential investors or lenders without having to show them bank statements that contain your own personal transactions.​

Your business bank account can be linked to the cloud-based accounting software you’re using (e.g., Xero). Here’s how if you’re using Xero.​

For example, you can see how much and where your money comes from and where it goes in the cash flow statement. Besides, it’s also easier to complete your business activity statement (BAS).​

Read more: 3 reasons why getting your BAS professionally done is a good idea​

When choosing a business bank account, you should consider the following:​

In short, it depends on your needs. Beany accountants recommend businesses having 2 business bank accounts:​

If you’re operating as a sole trader and running a side-hustle that’s not generating much revenue, you need to evaluate if it’s worthwhile getting a separate bank account.  ​

Opening a business bank account is more obvious if you’re running your business through a partnership, trust, or a company structure as you don’t want to spend a significant amount of time, effort (and money) going through your personal and business transactions. ​

We’re an online accounting firm that is always right here for you, your accounting pain relief. The most advanced technology lets us work way more closely with you than a normal accountant world. ​​

We have a dedicated team of certified accountants and a support team to take care of your business no matter where you are, so you can focus on growing your business. We take out the ‘fluff’, break down the barriers and get things done. Looking out for you is what we are all about. Get started for free today.​