3. Business Banking - The Easy Way

A business bank account seems like another level of complexity, but in reality, it makes managing your new income so much simpler. It also provides you with an extra layer of protection and legitimacy from a legal standpoint.

Keep it simple

In this post, we’ll go over a simple method of opening and using your new business bank account that is common for a single member business. Naturally, there are a lot of different banking strategies out there, but we’ll leave those to your accounting professionals, should you choose to hire one.

To start, choose which bank you would like to use. Opening a business account with the same bank you use for your personal finances can often keep things tidy. Especially when it comes to moving funds around and viewing everything in one place. Other things to consider would be their online and mobile banking options, do they have low checking account fees, high yield savings accounts, etc.

Next, if you want to keep things clean and simple, choose to open a business checking and savings account. This can often be done in-person or online. More on that below. Be sure to open a ‘Business Account’ and not a ‘Personal Account’. Should you ever find yourself in a situation where a client is filing a malpractice lawsuit against you, your business entity and the business account under it are the only assets of yours they can try to come after. If your business is payed directly into a personal account instead of a business account, then they may be able to come after your personal assets as well. This is one of the ways a business bank account can protect you from a legal standpoint.

A simple method of business banking

Once you have your business checking and savings account, here’s how to keep things safe and simple with your business finances. As a contractor, Psychology House will pay your business for your psychology services. Those payments should go directly into your business checking account. Once there, you are free to pay yourself and set aside money for Uncle Sam (the IRS). A safe way to do this is to take 30% of your paycheck and move it into your business savings account. When you work for a company as an employee, they automatically withhold taxes from your paycheck. As a contractor, you’ll need to set that money aside yourself. The remaining 70% of your paycheck can be transferred to your personal checking account after that. This method ensures, come tax time, that you have all the money owed already set aside in a separate account.

For example: If Psychology House pays your business $8,000, you would want to transfer $2,400 to your business savings account (8,000 x 0.3) for taxes. The remaining $5,600 (8,000 x 0.7) can be transferred into your personal checking account. Essentially, that’s your business paying you for your work.

Tip: Many business checking accounts have a minimum balance requirement, typically a few hundred dollars. Maintaining this balance often allows you to forgo any monthly fees. In either case, be sure to throw whatever the minimum balance is into the account when you open it, that way you never have to worry about banking fees.

Opening your business bank account

Some banks require you to make an appointment and open a business bank account in person, others allow you to do it online. Based on your bank and their options, choose the one that best fits your preferences.

To open a business bank account, most banks will require certain documents, such as:

Personal identification

• Drivers license or passport

• Social Security Number

Business documents

• Employer Identification Number (EIN) - This is the number the IRS assigned you when you registered your PLLC or LLC with the IRS.

• Business formation documents - This could be your document number or articles of incorporation. These were provided when you created your PLLC or LLC with the state of Florida

Your bank should list all the documents they require online.

From there, you will likely fill out an application, deposit any initial funds you would like to open the account with, and likely decide if you want a physical debit card and checks for your new account.

Remember, having a business bank account provides extra legal protection and simplifies your finances come tax time. And the best part is, it only takes 5 minutes each paycheck to keep your business finances in order.