A business checking account can be your best friend during tax season.
"Keeping business revenue and expenses separate from personal items can help a small-business owner track income and expenses at tax time and throughout the year," says Jennifer Rempe, lead tax research analyst at The Tax Institute at H&R Block in Kansas City, Mo.
Some business owners believe maintaining separate personal and business expenses is enough, but even the most organized entrepreneur can face troubles when dealing with the government.
"If a business owner uses his personal account for business expenses, it's harder to distinguish business and personal purchases and substantiate them in the event of an audit," Rempe says.
For small-business owners who are considering incorporation, a business checking account is an absolute must.
"Once a business is incorporated, it should never use the personal accounts of the owner when conducting business," Rempe says.
If a personal account is used, Rempe says the corporation's liability is no longer limited to the business itself. Creditors, including the Internal Revenue Service, can pursue the owner's personal assets to collect outstanding debts.