But in the modern world where side hustles, gigs and multiple income streams are the norm, and where the internet has made it possible to launch a small business from the comfort of your living room, the question of who needs a business checking account is a lot less clear. If you’re not launching a traditional small business, do you need a business checking account?
Social Security number if you are a sole proprietor or Employee Identification Number if your business is a corporation, partnership or limited liability company Business license and Articles of Organization or Articles of Incorporation Partnership agreement with the name of the business and its partners Between the harder-to-avoid fees and the more stringent paperwork requirements to open a business checking account, it’s understandable why side hustlers might avoid getting one.
What’s more, the IRS requires sole proprietors to identify their business and personal transactions within their personal checking accounts so they can accurately file their taxes. And don’t forget: An audit of your business could expose your personal transactions to scrutiny if you mingle personal and business transactions within your consumer checking account.Many small side businesses start off as a lucrative hobby.
Finally, the issue of professionalism and credibility could affect your taxes in an audit. If you show no profits for three years out of five, the IRS will classify your business as a hobby, and you will not be allowed to deduct any expenses or take any loss for it on your tax return.
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