I know that many creatives have “regular” employment and thus view their art as a “side gig.” As something they do in their spare time, they've never considered using a separate bank account for their art income and expenses… but they should. It doesn't have to be a hassle to set up and it doesn't have to be an official Business account (which requires you set up a business entity, like an LLC ); it could just be a separate personal account solely used for business income and expenses.
Esther's top 3 reasons you should have a separate bank account for your creative business:
1. Easily identify business income and expenses for end of year tax purposes -
Are you one of the MANY creatives using the "shoebox" method of receipt keeping which can be excessively frustrating to reconcile at the end of the year? Or perhaps you've become wise to the bank statement/venmo/cashapp highlighting method, printing statements and marking business related expenses in corresponding colors. I would argue that these methods are not only time consuming, but leave money on the table. You run the risk of excluding legitimate expenses because you can't remember if that charge at the parking deck was for loading in a show or a shopping excursion, or if that venmo was a reimbursement for food brought to you at an event you couldn't leave or for girls night in. Yes, you can cross reference your calendar, your amazon account orders, your venmo transaction descriptions; but you know what's even better? Knowing that if you paid for it out of your designated creative business account it's a creative business expense.
2. Keep business funds separate from personal funds until you are ready to pay expenses or pay yourself -
If you've never had to rob Peter to pay Paul, you probably don't need to read this blog post. For the rest of you, you're not alone in experiencing that heart-dropping moment when you realize that you've spent too much on groceries, or bought too expensive a gift for a loved one, or the power bill was higher than expected and you dipped into money designated for a project. If the money designated for a project is in a separate account, then it helps prevent these kinds of issues. It also means that if you HAVE to dip into it (because you must keep your phone bill paid to be accessible to clients) then it's easy to identify how much you owe back to the project and where the money went.
3. Easily reconcile income and expenses to business and project budgets -
Do you create a real budget for your projects? Do you have a monthly budget for your business? If you don't, you should (and Art Beyond can help with that). One of the most powerful things you can do for your career is really see how much money you make on each project and how much money you spend monthly on business related expenses. Do you pay a monthly fee for studio space? Do you have a social media manager? Do you write off your Spotify Premium subscription used to block out the kids watching cartoons while you paint? Those are recurring costs that you pay whether you've got a project or not, they should be on your list of write-offs at tax time AND they should be included in your monthly business expenses.
Great, you convinced me... now what?
It doesn't have to cost money to have a separate account for your creative business. Most Credit Unions have a free checking account option with no minimum account balance and a more personal feel. Additionally, once you are a member of a credit union you have access to better interest rates and lower fees. This can be helpful when your business grows to the point of needing different accounts or loans. When you are ready to pay yourself you can easily write yourself a check or make a transfer to your personal account.
If you're in the Charlotte area, Elizabeth and I personally recommend Truliant Federal Credit Union. We utilize several Truliant accounts to keep our bookkeeping simple and clean and we have had great customer service experiences with them. Additionally, if your creative practice is set up as a business entity (like an LLC), Truliant has Basic Business Checking accounts with no fees and $100 minimum balance requirement!
Umm... I have more questions.
Want to learn more about how to organize your business income and expenses or need some tips and tricks to prepare for filing your taxes? We have a class for that!
Check out our events HERE.
Have specific question(s) for Elizabeth or me? Book a 15-minute "Ask us Anything" Consultation available HERE.
❤️- Esther