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Does the thought of being hacked or scammed terrify you?
One of the first educational writing companies I got approved to write for required direct deposit payment. Another client requested my account for a wire transfer.
The thought of passing out my financial information absolutely scared me. I let my imagination run away with me, and envisioned scammers having access not only to my writing funds, but to our family’s other money as well.
No thank you.
Opening a business bank account was one way I overcame my fear. I keep it minimally funded, and feel better about accepting wire transfers or direct deposit.
Here are six reasons to open a separate account for your business.
1. Makes Taxes Easier
I don’t like doing taxes. When I thought about searching through pages and pages of transactions to find information if questioned, I decided that opening a separate account was prudent.
It’ll make tracking my income and expenses for my business much easier.
2. Keeps Spending in Check
As a budgeter, I don’t want to go into debt to grow my business.
Looking at my bank account, and not the bank account of the main family finances will help me limit my expenses. If I don’t have money to cover it, I can’t buy it.
That’s also why I have a budget for my business!
3. Minimizes Fraud
If I don’t have a lot of money in my account, someone can’t swindle me out of lots. I opted out of overdraft protection, meaning I can’t overdraw this account.
If I can’t do it, neither can a scammer. I purposefully keep a low balance in checking, just in case.
4. Helps the IRS Believe You Have a Business Not a Hobby
As I mentioned in my post about getting a business license, the IRS only allows businesses to deduct business expenses. A separate bank account looks more official, and is less likely to trigger an unwanted audit to find out if I’m truly a business.
Keep your personal spending and your business spending separate!
5. Gives a Professional Vibe
“Lisa Tanner Writing” is my business. Lisa Tanner is me. My debit card has both names on it. I love the professional look–I have a business!
It’s linked to my tax ID number (so I don’t have to distribute my social security number), and gives me a complete, professional feeling about my business.
6. Lets Me Plan for the Future
Right now, my business is a sole proprietorship. However, I have plans to turn it into an LLC in the future.
By getting my business account now, I’m showing that my business is a business, not a hobby. I’m developing an easy way to track finances.
And I’m set when I decide to make the move, as the business would then own the business account, and I’d continue to own my personal account.
Have you opened a business account? What made you make the move?
Lisa Tanner is a former teacher turned homeschooling mom with 11 kids. She's also a successful freelance writer. Lisa enjoys helping other busy moms find time to start and grow a side hustle of their own.