One of the most commonly-asked questions by freelancers is whether they need a second bank account. Need is a relative term - one doesn't need a separate bank account for your business the way humans need water or food or air. But it is a good idea unless your business is really simple and you have very few business transactions. Here's why: while most freelancers want to keep on top of their bookkeeping, sometimes it falls by the wayside. If you are not paying too much attention to the deposits and withdrawals in the one bank account you use for both personal use and business, it can be easy for things to get confused. When it comes time to pay your taxes, it might be difficult and time-consuming to figure out which items paid for out of your bank account are business expenses. If you have a separate bank account for your business, deposit all your business income in it, and pay for all your business expenses out of it, at the end of the year you have all the written records you need to do your taxes in your bank statements. Handy, huh? Plus, the IRS likes to see business transactions in a separate bank account. It makes your business more legit.
Here's a tip: technically it doesn't really matter whether the bank account you open for your business is a Business Account at your bank, or just a second personal account that you use for your business. There can be pros and cons of each, that you want to check out and think about before you decide which way to go. One pro of opening a true Business Account is that, if you use QuickBooks to keep track of your accounts, your bank is likely to have the capability to have you download all your transactions into QuickBooks, which is very nice. However, it may be harder to link a Business Account to your personal account, so transferring money could be a hassle. Check out what your bank offers and see what works best for you.