Running a freelance business comes with many challenges, from finding clients to figuring out how to manage working from home without succumbing to the potential pitfall of working from bed. Then there’s the additional hurdle of handling your finances. Even if you know the basics and can manage the ups and downs of freelance income, you may be missing out on a huge opportunity if you don’t have a business checking account.
Here are two key reasons why you should look into getting this type of account, and what you need to open one.
1. Business checking can protect your personal assets
You don’t have to separate your business from your personal finances to be successful. But if your business ever runs into a lawsuit, your finances could be in jeopardy — especially if you have your spending cash commingled with your business finances.
So what’s the solution? Opening a business checking account.
By having your business funds separated from your personal finances, your personal income can be protected from litigation — though that’s typically in a limited capacity. Regardless, it’s never fun to think about being the subject of a lawsuit, but at least this way, you have some peace of mind knowing that your personal checking account and savings account will be safe.
Depending on the bank you open a business checking account with, you could get access to a bevy of perks that could translate to more cash in your pocket. For example, you may get an account opening bonus, which can be $200 to $300 or more. (Just keep in mind that you may have to complete certain actions, like depositing a certain amount into the account, to qualify for those.) For reference, a $300 bonus on an account with a $10,000 balance would translate to a 3% APY. (That’s assuming the account doesn’t also earn interest.)
You can also build your business’s credit history and establish a relationship with that bank, which can help you access key tools like business lines of credit in the future. That can be especially helpful if your business requires you to invest in physical assets to function or you use subcontractors. Plus, having a separate account for all of your business income and costs means that it’s much easier to do your taxes.
How to get a business checking account
To open a business checking account, you’ll have to have the following information on hand:
- An Employer Identification Number (EIN) or a Social Security number (if you’re a sole proprietorship)
- Your business’s formation documents
- Ownership agreements
- Business license
You may be asked to provide additional information, depending on the bank you select.
A business bank account can be a vital tool for freelancers, providing protection from lawsuits as well as financial perks that can get you a leg up on the competition. Just make sure you do your homework and can meet the account requirements and capitalize on your account perks.
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