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 financial advice would you give your younger self?

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

9 simple ways to save

Here’s how to create a budget for yourself

How having savings gives you peace of mind

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

Helpful tips for safe and smart charitable giving

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

Tips to raise financially healthy kids at every age

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

What’s in your emergency fund?

Your 5-step guide to financial planning

Certificates of deposit: How they work to grow your money

5 financial goals for the new year

Allowance basics for parents and kids

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

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

5 reasons why couples may have separate bank accounts

Common unexpected expenses and three ways to pay for them

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

Myths vs. facts about savings account interest rates

Multiple accounts can make it easier to follow a monthly budget

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

Don’t underestimate the importance of balancing your checking account

How to Adult: 5 ways to track your spending

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

5 tips for parents opening a bank account for kids

6 questions students should ask about checking accounts

Steer clear of overdrafts to your checking account

How to build a financial plan that covers your savings and expenses

5 ways to maximize your garage sale profits 

How a Health Savings Account (HSA) can benefit your retirement plan

Protecting cash balances with sweep vehicles

What corporate treasurers need to know about Virtual Account Management

How to choose the right business checking account

Does your side business need a separate bank account?

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

Good money habits: 6 common money mistakes to avoid

How to be prepared for tax season as a gig worker

Saving vs. investing: What's the difference?

What types of agency accounts are available for investors?

3 steps to prepare for a medical emergency

What you need to know as the executor of an estate

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

How to gain financial independence from your parents

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

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

Is online banking safe?

8 tips and tricks for creating and remembering your PIN

What to do with your tax refund or bonus

3 financial tools to help automate your finances

5 things to consider when deciding to take an unplanned trip

Growing your savings by going on a ‘money hunt’

Working with an accountability partner can help you reach your goals

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

5 myths about emergency funds

Does your savings plan match your lifestyle?

Uncover the cost: Wedding

Uncover the cost: International trip

Are savings bonds still a thing?

Tips to overcome three common savings hurdles

Adulting 101: How to make a budget plan

Mindset Matters: How to practice mindful spending

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

You can take these 18 budgeting tips straight to the bank

3 tips for saving money easily

How to best handle unexpected expenses

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

Do you and your fiancé have compatible financial goals?

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

Personal finance for teens can empower your child

How to save for a wedding

How compound interest works

Money management guide to financial independence

First-timer’s guide to savings account alternatives

Overdrafts happen: Steps to get you back on track

Practical money tips we've learned from our dads

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

How to cut mindless spending: real tips from real people

How to increase your savings

Bank from home with these digital features

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

Beyond the mortgage: Other costs for homeowners

Disclosures

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 through U.S. Bank National Association. Deposit products are offered through U.S. Bank National Association. Member FDIC.