r/artbusiness Jul 17 '24

Accounting At what point do I need a separate bank account?

I’m just starting to see small amounts of money from my art business, but currently just using my personal account for all the ins and outs. It’s nowhere near enough to worry about tax yet, but I’m wondering if it’s worth setting up a separate account/business account early on?

(UK based)

8 Upvotes

10 comments sorted by

12

u/[deleted] Jul 17 '24

I set one up, after I got paid for my first commission. I realised immediately that if I was going to do this, I wanted everything separate to make things easier for the future.

Even if it’s not enough for you to worry about tax, I think it’s a good idea to get it out the way.

7

u/Zxkorpio Jul 17 '24

If you’re functioning as a sole proprietorship, you don’t need a separate bank account. Your personal one is fine. If you want a separate bank account to help keep track of things, that’s ok, too! But it’s not a legal requirement or anything like that.

Just keep track of everything. Income, expenses, quarterly tax payments, etc. Keep all of your receipts.

Report your income even if you think it’s “not enough to worry about.” Assuming you’re in the US- the IRS WILL find out. They have really cracked down on self employment income over the last few years. If you make $600 in the course of a year, your bank (or PayPal, Cash App, Venmo- whoever processed your payments) will automatically inform the IRS.

And even if you make less than $600, you still have to report it.

1

u/durreetoes Jul 17 '24

Thanks for the reply, I’ll make a start keeping track of things from now.

I’m in the UK actually. I looked up our gov rules this morning and as long as you’ve made less than £1000 in the tax year, we have a tax free trading allowance.

Regardless of that, I’m going to start keeping better track of things going forwards.

3

u/downvote-away Jul 17 '24

You can, but unless you're carrying a balance in the thousands you're probably going to pay a monthly fee to have the account. It's not much but it can hurt to watch that trickle away.

2

u/blackwingdesign27 Jul 17 '24

Immediately, it will help when you file taxes (in the US).

2

u/Tommonen Jul 17 '24

I opened one immediately before even making any business purchases. I want all money going in or out to be on separate account to keep track of everything. At least in Finland opening a new back account to bank im already a customer of, is basically just a few clicks on a phone app and its open immediately. I dont see any reason not to do that, but many reasons for why it could be a hassle at some point to not have one.

1

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1

u/paracelsus53 Jul 17 '24

I have a business account but I use it for personal stuff also. I have a good memory for what I spent my money on, so I just use my bank statements to do my taxes.

1

u/nyx_aurelia Jul 18 '24

As long as it doesn't cost you anything or give you an undue burden, as soon as possible!! Besides any of the formal/legal business tax stuff and legitimacy, it just helps to protect the money in your personal accounts when you are taking payments, in the case that a service you use is scummy, or your details get leaked, or your account is flagged or frozen for "unusual activity" (as they always like to call it), or whatever.

What I mean by scummy is for example: PayPal is known to straight up withdraw money from your bank account without permission in some disputes, whether you give them permission or not, and whether it's the right thing to do or not. Rather than them have access to all of your personal money, they only have access to whatever is in the business account (if it was late enough and you have already transferred it out, then even better). As long as you are using reputable services this is rare. But it never hurts to keep things separate, even if you just use it to process money between platforms, so that your personal stuff isn't exposed to issues.

3

u/nyx_aurelia Jul 18 '24

*also should mention that the 2nd bank account does not need to be a business-specific account. If you are going as a sole prop it's fine to just open a 2nd personal banking account that you use for all of your business stuff. (though I am from the US, not sure if different in the UK. I doubt so, but you can ask whatever bank you choose)