Tending to your money when you freelance is no joke. Feast and famine is real.
Cash flow can be inconsistent. And getting your head around our tax situation? That can make you want to shriek in horror.
And as a solopreneur, one of the major big questions looming over your head is if you really need a separate bank account for your business. It seems like another task on your neverending to-do list. Plus, you already have your personal account. So it's easy to use it for your freelance business, right?
Hold up. The short answer is yes. You really need a separate bank account for your freelance business. Let's go over the different reasons why it's in your best interest to keep your business and personal expenses in different places, and what to look for in a business bank account:
If your business is set up as sole proprietorship, you're not technically required to have a separate bank account. That being said, having a business bank account helps you establish credibility. It's far more professional for clients to make payments to your business than for you as an individual. Whenever and wherever possible, clients should send payments to your business.
Now, if your business is set up as a corporation or limited liability company (LLC), you're required to have a separate business bank account, and keep your personal and professional finances separate. This will help protect your personal assets should something go awry with your freelance business.
Have you ever mixed the Christmas decorations with the Halloween ones in your holiday box? Or maybe commingled your whites from your dark-colored clothes in your pile of dirty laundry? Imagine doing this for an entire year, and witnessing the madness grow exponentially.
When you mix your personal finances with your business finances, you'll be tasked with wading through the muck of your personal and business expenses, deposits, transactions, and so forth. Come tax season it's trying to make sense of what's your
Take it from someone who has been in it. It's no fun. To avoid this stressful, time-consuming, hair-pulling mess, open a business bank account from the get-go.
When you have a separate bank account for your business, it'll be easier to track its cash flow. For instance, when money tends to drop into your bank account, how much you're spending versus how much cash is coming in.
It can also help you gauge the seasonality of your business: times of the year when business is poppin', or times of the year when things are lean.
Knowledge is power, and the more details you have about the financials of your business, the easier it will be to make solid decisions.
Another pro tip: it's usually best to route your PayPal, Venmo, and Cash App payments to a business bank account. That way, you can keep tabs on all your tax liabilities. Plus, it'll help you with financial housekeeping — which is we'll get into just a bit.
Keeping your business financials separate from your personal is also a must when applying for small business grants and loans. Grant and funding applications usually require that you submit financials for your business, even if you're an independent who is an army of one.
Now that you're well aware of why it's super important to open a business bank account, we'll delve into why it's equally important to work with a small business bank that understands your needs.
These days, it's simply not good enough to go with a standard business account at any ole' financial institutions. Especially when you have options. When doing your homework for the best business bank for freelancers, it's helpful to look for a bank that has your back. Some features to look for:
Consider Lance. Designed for freelancers and creatives, it's a whip-smart business bank that lets you choose how much money to take home, and how much to save. It also features automated budgeting tools, and calculates and helps you set aside estimated quarterly taxes. Plus, it's completely free to open, and there are zero fees or minimum deposit requirements.
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