Launching a side gig is an exciting first step into the entrepreneurial world. If profitable, many side gigs soon turn into full-time business ventures capable of replacing some or all of the household's income.
As a side gig begins to grow and expand, it becomes easy to put off important tasks that could help the business continue its upward path. One commonly overlooked task that applies to every new business is the need to start and maintain a dedicated business checking account that is completely separated from those used to manage the household budget and income.
Documentation for legal purposes
One of the first reasons to open a dedicated business checking account for your new side gig is to create a documentable, stand-alone business venture. While it may not be necessary for your business to become incorporated until much later in its growth process, maintaining separate business bank accounts from the beginning will help to simplify incorporation processes later.
Tracking income and outgo for taxation and budgeting purposes
One of the most important reasons to maintain a separate business checking account for your new venture is to help with taxation. The practice of using a dedicated bank account for your new business helps to eliminate co-mingling funds with those from other sources and creates an excellent record of all income and expenditures.
Monthly statements and other records associated with a business checking account provide excellent tools to help new business owners provide a clear picture of income and deductible expenses for the purpose of filing income taxes. In addition, the information provided through the use of a business checking account can help new business owners become better at budgeting for overhead and paving the way for growth and expansion.
Using a business bank account to track all deposits and expenditures can also be beneficial in monitoring employee spending and determining potential theft issues.
Visualizing goals for future expansion
The numbers provided through the use of a dedicated business checking account can also help new business owners set realistic goals. Business owners can maintain and access these records online or by transferring them into spreadsheets, or other programs, to offer insight into growth and expense trends to assist with goal setting and performance reviews.
If you have recently started a side gig or small business venture, opening a dedicated business checking account for it is a proactive way to help simplify your management duties. It also provides a good foundation for growth and success. Talk to a local bank if you have further questions about business checking accounts.