Business account for sole proprieter/self employed?

amother

Mon, Jan 18 2021, 12:41 pm

(US based question)

I work as a freelancer and independent contractor (2 different businesses in 2 different fields actually.) Starting to realize I have not been doing a very organized job of keeping track of my personal income and business cashflow (I have very few actual business expenses so that's not a real issue - it's all service based). Also it's a nightmare whenever I have to report my income for anything such as medicaid.

I think opening a separate bank account for business and then paying myself a salary out of it would help with keeping track of cashflow.
So first question is, is there a best bank or type of account for this, is there anything I should know before just walking into my nearest bank and asking for an account, and am I going to end up paying fees for this?

Second question is if I do this, I'm assuming my business account income is still going to count as personal income for the purposes of taxes. Is that also the case for things like medicaid and food stamps? (don't judge me. Covid has been a wreck for service based businesses. Before this I was on NY State of Health which has the same reporting rules as medicaid so the question still holds.)

What really got me motivated to finally take care of this instead of just thinking it's something I ought to do, is the PPP loan. I missed the boat in the Spring but there is a second round now. I think having a separate business account that pays me a salary would make that work. Do they care if I only opened the account now, though the business was legit before?

amother

Brown

Mon, Jan 18 2021, 12:49 pm

You would want a small business account. It's possible that some banks are free but I pay around $15 a month for my Chase small business account because I can do all my banking on the app and they also have a location a couple blocks from my house. So it was about convenience.

I don't know what the difference would be between income going into your personal account and income going into your business account in terms of Medicaid etc. Either you're reporting it, or not. If they audit you they will fine the money no matter which account it's in.

Read the list of required documents for the ppp loan. If you meet the criteria and you can provide the required documents you should be fine.

amother

Mon, Jan 18 2021, 12:54 pm

amother [ Slateblue ] wrote:

I think it depends how your business is set up. LLC, Corp etc

I have a small business Chase Account- I don’t pay any fees if I keep a minimum balance.

I am sole prop but if there's something else I should do then I'm all ears. As I said, I am an individual freelancer in a service industry.

amother

Brown

Mon, Jan 18 2021, 12:54 pm

amother [ Slateblue ] wrote:

I think it depends how your business is set up. LLC, Corp etc

I have a small business Chase Account- I don’t pay any fees if I keep a minimum balance.

Correct, they only deduct the fee if I don't maintain the minimum daily balance that month. I think it's 1500/day.

amother

Silver

Mon, Jan 18 2021, 1:10 pm

You will need a federal tax id number if you want to open a business bank account.

It should not affect how you report income or your eligibility for a PPP loan, aside from making it easier to keep track of the income.

You do not take a salary you just take your profits out of your business bank account and put them in your personal.

Any changes to how you file your taxes, your business entity type (which will determine if you take a salary) should really be discussed with someone who has knowledge of your entire personal tax return so you can get the best tax advice.

amother

Burgundy

Mon, Jan 18 2021, 1:20 pm

I have a partnered small business.
I have an LLC set up and a bank account at Chase. If you keep a balance in your account there is no fee. You pay taxes on the LLC profits... so keep track of every expense. My company has a lot of cash flow and we are very on top $ so we don't get into a financial mess in our personal life. good luck

TwinsMommy

Mon, Jan 18 2021, 10:16 pm

I have had MANY sole proprieterships that have made many different amounts of money--- I NEVER did a business account--- -always just opened separate personal accounts for each business. I've been known to have two and three schedule C's at a time on my personal taxes.

amother

Salmon

Mon, Jan 18 2021, 10:54 pm

As above. I applied for a PPP on the basis of the Schedule C on my tax return, and was approved B"H. The separate bank accounts is for auditing for forgiveness, but I just opened a separate account to deposit the PPP money in and uploaded the statement from there.