Why you should open a separate bank account for your business
You've hopped on OnlyFans, created amazing content, and your page is taking off like wildfire- sound familiar? Hats off to you for running your own business, but it doesn't end there. Running a business means handling all aspects, including finances. While this may sound intimidating, there is no need to worry! I'm here to help.
If you haven't already, one of the first steps to managing your finances is opening a separate bank account.
If you are operating as a small business, you should have a separate account for that income stream. This will help you when it comes time to bookkeeping and save you from dreadful tax audits.
Let's look at why you should open a separate bank account and what option is best for you.
Should You Open a Separate Bank Account For Your Business?
You'll want to set up a separate bank account for several reasons. The first reason is you'll clearly see the amount of income your business is generating and the amount that is going back into the business for expenses.
It is important to only pay for business expenses out of this account. Having personal and business expenses drawn from the same account can lead to confusion when tax time rolls around. If a personal expense is mistaken for a business expense, it can potentially raise a red flag and cause you to be audited by the IRS.
Other reasons to open a separate bank account include:
Legitimizes your business
Makes it easier for bookkeeping
Helps ease the tax filing process at the end of the year
Creates a clear audit trail
Can help with business planning and income projections
Do I Need To Set Up a Separate Wire Transfer Account?
Wire transfer has become the primary way to receive payment for most individuals in this day and age. Linking your bank account and sending or receiving money has become easier than ever. If this is how you are receiving payment for your content creation account or any small business, then yes, you should have a specific account just for that income.
This account should be linked to a checking account that you use for business purposes only.
Business Checking Accounts Vs. Personal Checking Accounts
A separate account does not necessarily mean a business account. Freelancers or independent contractors without a corporation or LLC will get by fine with a personal checking account dedicated to business expenses only. Content creators- that means you!
However, if you have expanded your business into a corporation or LLC, a business account may be better.
Why Get A Business Checking Account?
If you have an LLC or a corporation, then it's time for the next step- opening a business account. While a business account often requires a fee which is a tax write-off and can be more challenging to set up, it comes with perks you won't receive in a personal account.
A Business Account Can Protect Your Personal Identity
A great perk about a business account is the ability to protect your personal identity. Having a business account limits any potential damage that can occur and takes away some of the personal liability.
When making a purchase or paying an employee, it will come from the business finances rather than your personal account. This means your business name will appear on any financial statements instead of your own.
You Can Accept Credit Card Payment
As content creation is an online business, having an account that accepts credit card payments is a huge plus.
Cut out the middleman and accept your payment directly through your bank account. You will no longer have to depend on wire transfer apps such as Venmo, CashApp, Zelle, and Paypal, and this will eliminate the extra fee you would receive through these applications as well as the additional 1099 they send at the end of the year.
Can Set You Up For Success
Setting up a business account can help you appear more professional and proves the seriousness of your business. Specific accounts may be able to assist with yearly and quarterly projections as well as expense estimations.
Another factor is that this separates your business credit score from your personal one. If you want to expand or open an additional business in the future, this can help create a healthy relationship with your bank and increase your chances of receiving a loan.
Wrapping Things Up
With your choice of traditional banking to online-only accounts, it's easier now than ever to set up a new banking account. This will save you from endless hours of sorting your expenses and dreadful tax audits. If you have a corporation or LLC, a business bank account will be a better option.