How many of you have business bank accounts? I’ll admit, it wasn’t the first thing on my list of to-do’s when starting my business. It’s not like there was a ton of cash running through it anyways! There also aren’t many differences between a business and personal account so it’s not that scary of a thing to do. However, it’s a smart idea that can both help you run your streaming business and help your mindset.
Why
There are two major reasons to get a business checking account. The first is that you then can do transactions in your business name instead of your own name. The second is that you’re separating your business and personal finances. That comes with a whole host of benefits.
Doing things in the name of the business
While it might seem like a small change, there are several advantages to executing transactions in your business name. First, you can obscure your own name. If you Twitch handle was CaptainSparklePants (and you’d properly filed a “doing business as”) then that’s what people would see. For me, people see Buff Your Finances instead of Galen Herbst de Cortina. Clearly, since I just typed it out for the world to know, that’s not as important for me but I know some folks who consider it paramount.
Next, it lends more of an air of authenticity when you’re looking for things like loans or proposing sponsorships. You look like you know what you’re doing! Admittedly, if you handle is actually CaptainSparklePants that might be slightly less true. Finally, if at some point you hire an employee that person could use that account appropriately without having to run through you for everything. That could be a major hassle saver.
Separating business and personal finances
The bigger benefit, in my mind, is that you’re separating your business and personal finances. This makes taxes, business monitoring, and your mindset better.
Have we talked enough about business taxes yet in these articles? Well buckle up, we’re not done yet. You need to make sure that you’re handling your taxes appropriately. We’ve talked about what you need to know about self-employment taxes before and I went through the different forms that might be relevant to your business. Each of those articles came with one consistent point- you need to know what you earned and spent to calculate your taxes. Separating your business expenses makes that a ton easier. It’s true, you could do your accounting accurately enough that it wouldn’t matter. That’s honestly a bigger hassle than forming good business habits. Plus, if you forget something there’s a lot less clutter to search through to find it.
Continuing in that theme, business monitoring is worlds easier if you have all of your transactions in one, isolated spot. Previously we covered monitoring business metrics when discussing the balance sheet and income statement. You should be tracking if your assets, liabilities, income, and expenses are changing (and how fast) if you’re treating your stream like a business and not a hobby. How much harder would that be to do if all of your business transactions were lumped in with your personal transactions?
Finally, your mindset improves when you get used to separating business and personal items. You learn to treat your business as a business and its own separate entity. Then, you make better decisions. It’s not what would make me most satisfied in this moment, it becomes what would make the business the most successful. That’s the kind of long-term thinking you want to be doing.
Here’s how it should look:
How
It’s really easy to do, actually! All it requires is a little thought and research on your part. And by research I mean checking Nerdwallet, Googling a bit, and considering which factors are most important for you. Once you’ve made your decision on the bank you want to use then the execution is easy.
Factors to consider
So what factors are good to consider? First, consider the fees. What does the bank charge you to use their services? Fees add up quickly if you’re not careful in selecting your bank. Second, look for account minimums and interest rates offered. The higher the interest rate and the lower the minimum the better. Third, are there any special offers for opening the account? Some banks give a bonus if you sign up with them and meet certain requirements. Finally, on the financial side, is there a good debit or credit card attached? If you’re running a decent amount of expenses through your business and can get a cash back card that’s an automatic discount on anything you buy. Those add up over time.
You also need to consider non-financial factors. Is the bank known for good customer service? Does it have locations near you? Does it have good online access? Will it have any idea what you do in your business? Mostly, it boils down to ease. Your banking should give you as much as possible with as little hassle as possible and you need to find the right balance for you between those two themes.
Actually signing up
You will need information about your business and yourself. If you’re a sole proprietor, as I’d guess most of you are, then you need your Social Security number, your “doing business as” (DBA) form, and your business address. Most banks also require more information like gross revenue and industry. I was able to do my application online which made life a lot easier. The entire process took me approximately 15 minutes and then I had to mail in a copy of my DBA. A couple of weeks later I received my debit card in the mail though I’d had online access to the account earlier. Trust me, the bank wants you to sign up so the actual application steps are easy.
If you’re some other form of business then you’ll also likely need your articles of incorporation or your partnership agreement in addition to the above forms. Besides that, the rest of the steps should be the same.
Personally, I use Capital One’s Spark for business checking. My reasoning was pretty simple- I use Capital One for my personal banking and they did a good job. I read through the info and reviews of Spark and it looked like it was a good account, so I went with it to only have to deal with one bank. Unfortunately, Spark is on longer accepting new account applications.
Conclusion
Ultimately, the reason to do this is because it makes your life simpler. Yes, you have two places to look for information which can be a pain. However, the proper mindset is that an ounce of prevention is worth a pound of cure. If you’re proactive in monitoring your business and using a separate account to make that easier then you’re saving yourself time and most importantly buying yourself more time live. More time live means more revenue and more time doing the thing you love. The reason to run your business well is to make your life better! The best part? It’s not that hard to do! If you’ve got any questions on this contact me or leave a comment below.
