Tuesday, April 5, 2016

Creating a Business Bank Account

All too often, beginning or part-time creatives get into trouble with money management because they don't separate their business income and expenses from their personal expenses.  This problem can be compounded if you share an account with a spouse or family member who isn't part of your business, yet when they seem to be dipping into business income as if it's all personal income.

If you're a sole proprietor and you track your income and expenses religiously every month, than you may be able to get away with one bank account for personal and business as long as your business name is nothing more than your legal name and you don't need a DBA registration.  However, if you're not very strict about business accounting and you tend to put off most expense tracking until the end of the year or just before April taxes are due, you'd be best served by having separate business and personal accounts so that you can easily track your personal expenses separately from your business expenses.  Most creatives I know fall into the latter category- which is totally OK, and exactly who this post is intended to help.

If your business name is anything other than your first and last name only... even if it's just "Ron John Photography", you'll likely need to file for a DBA in order to legally collect payment under your business name.  It's often a fast process and some states allow you to take care of it all online.  A registered DBA is often necessary before you can open a bank account that will accept payment under a business name.  Certain banks may also require a registered federal EIN, even if you are not a corporation, do not have any employees, and do not collect sales tax as part of your business model.  You'll learn more about what's required from your local financial institution once you begin the process of applying for a business account.

Before I was a photographer, I worked in the financial sector, which gave me familiarity with the different advantages of credit unions and banks.  Credit Unions are often overlooked as a business banking solution because some people assume they aren't as convenient as a big branded bank that offers ATMs at every corner.  However, having those ATMs on every corner comes at a high cost to the average account holder by way of higher fees for regular account management activities.  Credit Unions are membership-based, which helps keep banking fees low while still providing convenient services like depositing checks through your phone, making transfers online, and making deposits and withdrawals at affiliated Credit Unions around the country, and some even pay for the ATM fees charged by other institutions!

If you are already comfortable with a certain banking institution for your personal account, you can always just open a business account at the same institution to make banking with two accounts more convenient- but opening a business account may also be a great opportunity to see what advantages are available at other financial institutions.  Large banks tend to be more beneficial to large corporations rather than small businesses- so definitely spend a little time exploring your options.

These services are important to me as a business owner in my financial institution:
- Free Checking Account: no monthly fees and a low minimum balance requirement
- Online Bill Payment: the ability to schedule recurring payments for credit cards or loans and to easily make one-off payments mailed direct to independent contractors
- Depositing Checks Online or via Mobile App: to avoid waiting until I can get to a bank
Deposit Availability: as a business, I can regularly receive large checks from personal or small business accounts and need to make sure there aren't excessive holds on large deposits
- ATM Availability & Fees: if checking out a credit union, make sure they are part of an affiliated network of credit unions for in-person banking even when you're away from home
- Online Statements: preferably in .xls format to easily import into accounting software, share with bookkeeper or accountant, or for categorization offline
- Online Expense Tracking Software: some very awesome credit unions and banks actually offer a built-in quicken product to help you categorize income and expenses right in your online account
- Online Account Transfers: to quickly & easily transfer from business to personal accounts
- Overdraft Protection: to make sure essential business bills get paid even if a client's check bounces
- Credit & Loan Options: for emergency business equipment purchases and expenses

Do you have any other questions?  Feel free to ask and check back in a few days for a response.

Anne Ruthmann is a professional photographer in New York City. With over 10 years of success as a full-time photographer in weddings, portraits, editorial, and now architecture and interiors, she spends any extra time she has helping others find smart solutions to business problems.  Stay in touch on Instagram, Twitter or Facebook.

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