One of the basics of small business banking 101 is to set-up a business bank account. This fundamental business function is often lost with new and part-time business co-mingling funds. Using a personal bank account for small business banking is common among part-time business like multi-level marketing and self-employed sole-proprietors such as realtors and consultants.

Venturing out into the world of entrepreneurship is risky. Many new business owners reduce the risk by starting a business part-time while retaining a full-time income. This can be a great approach to starting a company, but run the business as a business.

Frequently, business owners try to process business transactions through their personal bank accounts in an effort to reduce expenses and bank fees. Unwittingly, they are creating more potential problems for the business in the future.

5 Reasons Not To Mix Personal and Small Business Banking

Hobby Business: Government rules stipulate that only businesses can deduct business expenses. If your business may look like a hobby, a personal bank account for business creates a harder time convincing the government you are operating a business.

Tax Time Nightmare: When it comes time to declare income and expenses from the business, personal transactions will have to be separated from business transactions. It will be a nightmare and time burden going through all transactions and figuring out business from personal.

Limited Audit Trail: It is not a requirement of the government that you have a separate small business banking account and record keeping method. It is required that all records be accurate, complete, permanent and showing a clear record of income and deductions. Providing a separate business statement and record provides a clear audit trail.

Missed Deductions: Co-mingling your small business banking with personal creates a mess of transactions on your account statement. It is easy to overlook or miss deductions you may be entitled to. Whether you or an accountant will be preparing the tax return, messy record keeping will cost more in time, money, and possible missed deductions.

Lack of Professionalism: If you have clients who write checks to you, check writing in your personal name as opposed to business can convey that your company is a part-time venture. Even if your business is part-time, take it seriously and your clients will too.

Take the time to open a small business banking account to simplify your record keeping and life. Shop around for the best deal. Small business banking varies in fees and features. The costs of a business account are far less than the benefits to your business. Fees are partly tax deductible as an expense. Don't forget to consider that your business may grow. Opening a business account with a bank earlier can help with required financing in the future. Remember run your business as a business.