The importance of having a business bank account as a freelancer/business owner
If you have a business bank account - you’re golden. I love you. There’s no need to read this newsletter. Have a good day!
But if you don’t…keep reading.
In the dynamic world of freelancing and entrepreneurship, managing finances is a critical aspect that demands attention. One key practice that often gets overlooked, yet can significantly impact your financial stability and professionalism, is having a dedicated business bank account. Let's explore why this financial move is a game-changer.
The bottom line and the truth is: having a separate business bank account is going to make your life a lot easier.
Is it a pain to find one and take time out of your day to do the paperwork? Yes.
But is it worth it? Yes.
Short term pain for long term pleasure.
The number one reason for having a business bank account is that it keeps your business more organized. You don’t have to sort through personal expenditures to find your business expenses or payments and it’s all in one place.
This is important – you have to have a separate bank account if you are a separate legal entity. What does that mean? This goes back to the difference between LLCs and Sole Proprietorships. A separate legal entity is where your business is separate from your personal assets. This means that if you open as an LLC to give yourself more protection, you would have to open a separate business bank account and it’s required by law.
On that note…don’t forget that if you have an LLC and go to open your business bank account, you also need an EIN. Don’t make the mistake I did and show up with your LLC registered but no EIN. WOOPS!
Sole proprietors are not required to open a separate account UNLESS they are operating under a DBA. So if you are in the situation where you decide to change your name to be more official, but keep the Sole Prop structure, you will have to open a separate business bank account.
Finally, and this goes back to the first point, everything will be easier for you when it comes to understanding how to pay yourself, paying quarterly taxes, and if you want to get a business credit card. This is because everything is more organized for you, if you hire an accountant, if you apply for a credit card and run a credit check, etc.
Are you interested in leveraging your corporate background to create a lifestyle business focused on freedom and flexibility?
Here’s a big tip that I learned in the beginning of my journey and still applied today – local banks are often a lot kinder monetary-wise when you are a young, new business. Bigger banks like Bank of America or Santander usually have a monthly fee and the only way to waive that is if you have a daily or monthly balance or a certain monetary amount of deposits.
For example, a big bank may charge you $15-$60/month for a small business bank account, but you need to keep something like $5000 within the account at all times OR get over $10,000 a month in deposits from clients. This is unrealistic for most people starting out.
I was on a forum when I was starting out that gave the tip to look at local banks and I’m happy I did. You can definitely find online banks that offer free business bank accounts, but local has been the way to go on my end as it’s helped when I’ve had issues and I could walk right in – which has happened a handful of times in my career.
Plus, enjoy a bonus pre-cohort call with me to dive deep into your business and set personalized goals.