Let’s talk bank accounts and your Silhouette or Cricut craft business for a few minutes. Earlier in the year, I had a craft business owner email me for advice about the easiest way to separate her business expenses from her household expenses when she was preparing to file her federal taxes. She told me that she had already spent hours trying to go through account statements to see how much she had spent for business purposes. After giving her a few tips, I also advised her to open a business account for her business so that she wouldn’t have the same issues next year.
Let’s take a look at some of the reasons why you want to have a separate bank account solely for your business.
4 Reasons Your Craft Business Needs a Separate Bank Account
- It’s timesaving. As I mentioned above, having a separate bank account allows you to easily see how much you are spending and making in your craft business. Come tax time, it’s pretty easy to locate all your expenses and income.
- It’s easier to control your business cash flow. When your business and personal transactions are all mixed together, how can you tell how profitable or not profitable your business is? I mean, you can’t log in and check your business bank account balance if you don’t have one!
- It’s required for most registered businesses. For most business structures (like LLC, Corporation, or Partnership), you are required to keep separate business accounts and not comingle business and personal transactions. (Note: For sole proprietorships in most states, you are not legally bound to have a separate bank account since the sole proprietorship is an extension of yourself.) Additionally, if you ever have an IRS audit, they may argue that expenses you’ve deducted as business related are personal related. For example, what about monthly bank charges? In a comingled account, do they fall under personal expense or business expense? If you had a business account, they’d definitely fall under business expenses.
- It’s against the bank policies. If you read to ‘fine print’ terms and conditions for your personal bank account, you are likely to find out that it’s against the bank’s policies for you to use a personal account for business purposes.
Now, where to find an inexpensive business account? Start with the bank that you use for your personal accounts. Since you are an existing customer, they may be able to give you a good deal or free business account.
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