I always check out the posts on the discussion list of the Editorial Freelancers Association (EFA), an organization to which I have belonged for just over four years. More than once, I have come across posts from editors who have just started their freelance business. Some of these new business owners want to know if they should have a separate banking account for their business—one that is free of their personal bank account.
I always reply to these posts with a resounding YES, YES, and YES—as do the EFA members who have been in business at least as long as I have.
I cannot imagine doing my taxes for my business using only a single personal account for everything. (I’m talking about those wonderful forms—Schedule SE, Schedule 1, and Schedule C, to name three.)
Having a separate account also allows me to see exactly how much my business is making and makes it easier to create spreadsheets which tell me my earnings, expenses, profits, and (gulp) losses, if any.
If your business is an LLC, you had best be keeping your personal and business finances separate. In the unfortunate event that a client sues you, they may go after your business assets, but not your personal assets. If they are lumped together in one account, it will give you a big headache untangling them.
There is also the psychological effect. Back when I opened my business bank account, the bank graciously gave me a ledger, a stamp, a binder of checks, and a book of preprinted deposit slips. Wow! I thought. I feel so official. I’m a real business owner now.
When I first started my business, I asked a friend who was instrumental in helping me do so whether I should have a separate business account. I was green and naïve; what did I know? She gave me the aforementioned resounding YES and I owe her a huge debt of gratitude.