Benefits of a Business Bank Account for Your Side Hustle

Look at you, side hustler — delving into your finances and assessing whether you should get a business bank account for your side hustle. Entrepreneurial high five! It’s a great question, and the answer is different for everyone. But in this article, we weigh up some of the benefits of having a business bank account, so you can discern whether it’s the right way to go for you and your little side hustle that could.

What is a business bank account?

Business bank account, small business banking account, freelancer bank account — call it what you like, it’s essentially a bank account dedicated to your business’ finances. When you have a business bank account, you can fully separate all your business and personal expenses, easily keep track of relevant goods and services taxes, and make record keeping and expense management substantially easier.

What’s the difference between a business bank account and a personal bank account?

Features of business bank accounts will vary depending on where in the world you and your side hustle do your thing, but generally, the features are similar to a personal account — except the account can be opened in the name of your business, rather than your personal name.

Some business bank accounts may offer perks or rewards, or tools to help you manage your business better, but the key to watch out for is fees. Business bank accounts might carry higher fees than your personal account, or have certain requirements that qualify for a fee exemption, so be careful. That said, fees on a dedicated business bank account may be deductible when preparing your business tax returns.

Benefits of a business bank account:

• Easily separate personal and business income and expenses to make it easier at tax time.
• Maximise your deduction opportunities by keeping all your business expenses in one place. With one single transaction list in your business bank account, you’re less likely to miss deductions and miss out on refunds.
• A business bank account can help you look professional and established when liaising with clients.

What do I need to open a business bank account for my side hustle?

The documentation you’ll need to open a business bank account will depend on the type of structure your side hustle operates under. A sole trader or proprietor will require less complex documentation than a company. That said, business bank accounts generally require identity documentation and all relevant registrations the business has.

How to open a business bank account

If you decide to open a business bank account for your side hustle, compare accounts online to decide which one is right for your circumstances, and then follow the instructions to apply. You may need to visit the bank in-branch, or you might be able to verify your identity online.

The bottom line

So, should you get a business bank account for a side hustle? There are a few considerations that may help you make the decision:

• How much your side hustle makes
• Whether the fees are worth it in comparison to your income
• What your long-term plans are for your side hustle, e.g. do you plan to grow and scale, or is it short-term?
• The volume of income and expenses that your side hustle manages

Separating your personal income and expenses from your business income and expenses is game-changing when it comes to tax time and record keeping — but whether you do that with a business bank account or a separate personal bank account is up to you.

Emma Edwards is a finance copywriter and blogger, on a mission to humanize the financial services industry by creating meaningful content that’s accessible and empowering. You’ll find her penning money tips at her blog, The Broke Generation, sharing financial insights on Instagram, or injecting life into content for her business clients.