When starting a side hustle there can be some uncertainty about how “official” to make the business. One key question is whether to set up a separate business bank account or to just run transactions through your personal bank account. If you haven’t already, take a moment to watch our video on whether to operate as a Sole Proprietor or as an LLC. The thought process will be very similar when it comes to setting up a business bank account. We’ll link that video down in the description for you to check it out. Here are few principles that should help you determine whether you should set up a separate bank account:
- If you intend for this to be a long term business - business bank account
- If you are selling to businesses you don’t want your business customers to have to make checks out to you personally. It just feels less professional - business bank account
- If you are actively marketing/seeking work - business bank account
- If your friends and family just pay you to do some side projects, but not ongoing work - personal bank account
- If you aren’t looking for ongoing work and don’t really want this to turn into a consistent side business - personal bank account
- If you haven’t made your first sale yet and don’t actually know if you will ever get a sale - personal bank account
If you have an ongoing side business you will want a separate bank account eventually because it will make life so much easier for your bookkeeping and taxes to know that all of the transactions in the business bank account are specifically business-related, so you might as well just make that transition if that describes your situation. Now, say a business bank account makes sense for the Side Hustle you have started or are trying to start, here are a few steps on how to get a business account created.
- First, you’ll need to figure out what type of account you may need. Common accounts are checking, savings, credit cards, and merchant services. The bank you choose should help you figure out what accounts are necessary for your Side Hustle but be wary of attempts to have you open more than needed. Just be sure to understand the purpose for each account and any fees or strings attached to each account.
- Select what Bank you’d like to have an account with. You don’t necessarily have to use the bank that you have personal accounts with. Be mindful of the benefits of working with that bank. What rates & fees specific types of business accounts may have as well as what type of technology and customer service that bank offers.
- The items you will need to open the account may differ from bank to bank but commonly required items are a Tax ID/ EIN number or Social Security number if you are a Sole Prop, business registration or incorporation documents for your LLC or business entity, and necessary permits or licenses for your business.
- Contact the bank you have chosen to work with to set up an appointment or walk through the steps they require in order to create the account and learn what additional items you may need to provide.
- Lastly, finalize the creation of your account and begin using it!
We hope you enjoyed this short and sweet video as you figure out if a business account is the right step for your Side Hustle. If you have specific questions about how to price your product or service, please reach out and we’d be happy to help because here at Side Hustle University we serve as a course guide that is focused on encouraging you to create your own side hustle! We are committed to giving you the best opportunity to identify, shape, and build your business from the ground up. We encourage you to check out our website to learn more about how you can become the side hustler you've always wanted to!