a bank account
After you’ve legally registered your
business, you’ll need somewhere to stash your business income. Having a
separate bank account keeps records distinct and will make life easier come tax
time. It also protects your personal assets in the unfortunate case of
bankruptcy, lawsuits, or audits. And if you want funding down the line, from
creditors and investors alike, strong business financial records can increase
the likelihood of approvals.
Note that LLCs, partnerships, and
corporations are legally required to have a separate bank account for business.
Sole proprietors don’t legally need a separate account, but it’s definitely
Start by opening up a business
checking account, followed by any savings accounts that will help you organize
funds and plan
for taxes. For instance, set up a savings
account and squirrel away a percentage of each payment as your self-employed
tax withholding. A good rule of thumb is to put 25% of your income aside,
though more conservative estimates for high earners might be closer to one
Next you’ll want to consider a
business credit card to start building credit. Credit is important for securing
funding in the future. Corporations and LLCs are required to use a separate
credit card to avoid commingling personal and business assets.
Before you talk to a bank about
opening an account, do your homework. Shop around for business accounts and
compare fee structures. Most business checking accounts have higher fees than
personal banking, so pay close attention to what you’ll owe.
To open a business bank account,
you’ll need a business name, and you might have to be registered with your
state or province. Check with the individual bank for which documents to bring
to the appointment.
Learn more: What Does It Really Cost to Start a Business?
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