After you’ve gotten a business license, the next step is to open several business bank accounts. It only takes a few hours and is well worth it in the long-run – especially come tax season.
Before I started my business, I just had personal checking and personal savings accounts (we’ll come back to those later). Once I got the license, I opened 3 additional accounts:
- Business Checking: This is where I deposit all money earned from my business; I also use the corresponding debit card to make all business purchases, just so there’s a record of income/expenses
- Business Savings: This is where I set aside a certain percentage of earnings each month to cover taxes (what percentage of earnings you put aside depends on how much you’re making and how many tax deductions you qualify for)
- IRA: A few months after I opened the previous two accounts, I finally got around to opening an Individual Retirement Arrangement (IRA) Account; I’m not kicking in much until I pay off my credit card (although what I am kicking in is tax-deductible), but I wanted to start the process of saving for retirement since I blew it off in my 20s and because I’m not going to hold out for a full-time job with good benefits (not that I’d want one in the first place)
You can open more accounts as you see fit, but these three (plus personal checking & savings) should be enough to get you started. While having the accounts makes it easy to track how your money comes and goes, you still need to do your own bookkeeping. We’ll get to that in the next post…
See here for a full list of “Life-Ready Musician” posts.