Aspects of Banking In business.
I just opened a business checking and savings account today. It was hassle free and easier then I expected. It probably only took about an hour, but that will be dependent on the bank chosen I’m sure.
If you are planning the same thing you will need (for an LLC):
1.Articles of Organization that are sent to you once you register for the LLC. In Illinois it is form LLC-5.5.
2.The response from registering for your Employer Identification Number. This is form SS-4. It will have your EIN on it.
I opened two business accounts. The first is a standard checking account. This is where I will deposit all “profit” from every business endeavor I have. The second is a business savings account. This is where I will transfer tax money for holding until I pay the pipers their tax (aka. the government and state). I will probably not make much interest on the money, but it has the major benefit of segregating the tax money from everything else. (Edit: In retrospect this plan didn’t work out that well as I decided to make estimated payments to the government every time I invoiced my client to be on the safe side. Savings accounts also have a limited number of withdrawals per month allowed.)
I’m also planning on opening a business credit card account, so I can charge all business expenses completely separate from my personal card. I personally think credit cards are great if used properly. I might have paid interest one or two months throughout the years I have had a credit card, like back in my meager college days. The money in points I have made in return is like a rebate on everything I purchase. Over the years, it’s been hundreds of dollars back. Don’t get me wrong though, if you can’t properly use a credit card, don’t use one. Standard interest rates on credit cards can be insane.
Back to the banking experience…
You will be asked for various information like your SSN, but nothing too extreme. I decided to use a different bank from my personal one, so I can completely separate work and business. I’ll probably open a savings account at my personal bank in the future, so I can start saving for various things I plan on doing or buying.
That brings me one step closer to changing over from the staffing agency. I need to start thinking about finances and how I can manage them properly. Of course, the big issue will be taxes and how best to deal with them. I will be required to make unemployment, income, and self-employment estimated tax payments to the government quarterly or possibly monthly, not sure yet. I have yet to make some hard calculations as to how much my taxes out of each “invoice” will be. That said paychecks to invoices, here I come! Just to get started I might just do a 50/50 split until I get all of the hard data hammered down. It will be best to transfer the invoice amount into the checking account and then transfer a percentage into the savings. This way, the checking account will have a complete record of my profit. (Edit: Always deposit all invoices into your business checking account. Also, you will not be allowed to deposit a check written out to your business into your personal account.)
My one gripe is that my primary client can’t do any form of direct deposit for contractors, so that will take a bit of extra time each week. I took that into account when I chose a bank though. From my house, it’s only a 5 minute drive to their primary location.