Does your side business need a separate bank account?

June 12, 2019

If your side hustle has turned into a small business, it deserves its own bank account – here are five reasons why. 

 

With a growing number of people selling crafts on Etsy, dog-sitting on Rover, snapping wedding photos on weekends or peddling homemade baked goods, it’s clear that side jobs are trending. In fact, according to a recent Gallup study, 36 percent of all U.S. workers participate in the gig economy in some capacity, including part-timers and multiple-job holders.

Beyond the potential to express passions outside of the traditional 9-to-5, these side hustles can also provide extra income. And, when a hobby evolves into a small business, you may want to keep personal and business finances separate. Read on for five reasons to open a business bank account.

 

1. Better monitor your business finances

As your side hustle grows, chances are your expenses will, too – think website fees, shipping, products or materials. At that point, it may be harder to compartmentalize personal and company-related expenditures. A separate business bank account allows you to easily track expenses and earnings, ensuring you don’t spend more than you bring in.

 

2. Ease tax filing

No matter how much (or how little) income your business rakes in, it needs to be reported to the Internal Revenue Service. By opening a bank account for your business, you’ll avoid the hassle of combing your personal checking for business income and possible deductions come tax time.

If you need help determining if your side hustle qualifies as a small business, the IRS has a helpful guide of factors to consider. For instance, do you carry on the activity in a businesslike manner? Do you depend on income from the activity for your livelihood? Do you change your methods of operation in an attempt to improve profitability? If you answer yes to many of the statements, chances are you’re running a business by IRS standards.

 

3. Business banking makes it official

Many side gigs start as a sole proprietorship – meaning, a business owned and run by one person, with no legal distinction between enterprise and operator. But as it flourishes into a small business, you may want to consider registering as a limited liability company (LLC) or corporation. Along with asset protection, credibility and tax benefits comes the requirement to keep personal and business finances separate, so a designated bank account is a must.

 

4. Look more professional

You want prospective clients to take you and your business seriously. Using a business-account debit card or checks when purchasing from vendors, or being able to accept payments to a business checking account, sends the message that you are a well-seasoned professional.

 

5. Establish connections at the bank

Having a relationship with a banker you trust is important, especially if you’re a small-business owner. As your side hustle expands, you may need a loan or a business credit card in the future. If you have a business bank account already in place, a banker has a record of your earnings and expenses at their fingertips. It’ll hopefully make the approval process quicker and smoother.

 

Looking to open a business bank account? Explore your options at U.S. Bank. Or, click here to learn more about the gig economy and meet people who run a business on the side or full-time.

Learn about U.S. Bank

Related content

What I learned from my mom about money

How compound interest works

What corporate treasurers need to know about Virtual Account Management

Your 4-step guide to financial planning

Key components of a financial plan

Should rising interest rates change your financial priorities?

6 common money mistakes to avoid

Stay on budget — and on the go — with a mobile banking app

How to choose the right business checking account

How to be prepared for tax season as a gig worker

A who’s who at your local bank

Here’s how to create a budget for yourself

How to prepare for healthcare costs in retirement

The connection between your health and financial well-being

Is a Health Savings Account missing from your retirement plan?

Steer clear of overdrafts to your checking account

How to decide when to shop local and when to shop online

Retirement expectations quiz

What financial advice would you give your younger self?

How to manage your money when you're self-employed

Starting your homebuying journey: Tips from a U.S. Bank Goals Coach

Working with an accountability partner can help you reach your goals

Growing your savings by going on a ‘money hunt’

Recognize. React. Report. Don't fall victim to financial exploitation

Booming in the gig economy: A new chapter leveraging 45 years of experience

Travel for less: Smart (not cheap) ways to spend less on your next trip

Multiple accounts can make it easier to follow a monthly budget

You can take these 18 budgeting tips straight to the bank

Certificates of deposit: How they work to grow your money

9 simple ways to save

Are savings bonds still a thing?

How I did it: Learned to budget as a single mom

5 financial goals for the new year

Which is better: Combining bank accounts before marriage — or after?

Does your savings plan match your lifestyle?

Don’t underestimate the importance of balancing your checking account

Do you and your fiancé have compatible financial goals?

Is it time to get a shared bank account with your partner?

Overdrafts happen: Steps to get you back on track

Checking and savings smarts: Make your accounts work harder for you

Saving vs. investing: What's the difference?

How to cut mindless spending: real tips from real people

What types of agency accounts are available for investors?

How to manage your money: 6 steps to take

How to choose the right custodian for your managed assets

Webinar: 5 myths about emergency funds

5 things to consider when deciding to take an unplanned trip

5 myths about emergency funds

5 reasons why couples may have separate bank accounts

A passion for fashion: How this student works the gig economy

Adulting 101: How to make a budget plan

Allowance basics for parents and kids

By the numbers: The gig economy

Common unexpected expenses and three ways to pay for them

Finding a side gig to fund your goals

Helpful tips for safe and smart charitable giving

Tips for working in the gig economy

5 tips for parents opening a bank account for kids

6 pandemic money habits keep for long term

How having savings gives you peace of mind

How to best handle unexpected expenses

How to manage money in the military: A veteran weighs in

How to save for a wedding

It's possible: 7 tips for breaking the spending cycle

Personal finance for teens can empower your child

Tips to overcome three common savings hurdles

Webinar: Uncover the cost: Wedding

Webinar: Uncover the cost: International trip

What military service taught me about money management

Building a financial legacy for your family and community

Earning in the gig economy: Gladys shares her story

First-timer’s guide to savings account alternatives

How to increase your savings

U.S. Bank asks: Do you know what an overdraft is?

Money Moments: 8 dos and don’ts for saving money in your 30s

Myths vs. facts about savings account interest rates

Bank from home with these digital features

Practical money tips we've learned from our dads

What’s in your emergency fund?

Tips to raise financially healthy kids at every age

Money management guide to financial independence

5 ways to spring clean your finances and save money year-round

Saving for a down payment: Where should I keep my money?

Beyond the mortgage: Other costs for homeowners

How to Adult: 5 ways to track your spending

3 steps to prepare for a medical emergency

What you need to know as the executor of an estate

College budgeting: When to save and splurge

6 questions students should ask about checking accounts

How to save money in college: easy ways to spend less

Checklist: How to gain financial independence from your parents

Recognize. React. Report. Caregivers can help protect against financial exploitation

Is online banking safe?

Identity stolen? 5 steps to take immediately

8 tips and tricks for creating and remembering your PIN

How to use your unexpected windfall to reach financial goals

Dear Money Mentor: How do I pick a savings or checking account?

Solutions banks can offer during the COVID-19 pandemic

Webinar: Mindset Matters: How to practice mindful spending

Webinar: Smart habits and behaviors to achieve financial wellness

How I did it: Turned my side hustle into a full-time job

Make your business legit

How to choose the right business savings account

Does your side business need a separate bank account?

Protecting cash balances with sweep vehicles

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.

U.S. Bank is not responsible for and does not guarantee the products, services or performance of U.S. Bancorp Investments, Inc.