A Guide to Establishing Separate Bank Accounts

Last week, we spoke about the importance of keeping your personal bank accounts separate from your business accounts and why.  When you’re earning income as a solopreneur, freelancer or consultant, it’s crucial to keep them separate. 

Ideally, you deposit all professional income into a business checking account, and then pay yourself a regularly scheduled “draw,” while saving an additional 30% for taxes.

For example, you run a graphic design business, and regularly sub-contract to user interface developers and mobile app developers. In 2012, your graphic design practice grossed $240,000. You had $160,000 in expenses, leaving you with $80,000 in net profit. In 2013, you expect gross revenues to be about the same, which means you can pay yourself $80,000, about 30%* of which, or $24,000, you need to pay in federal taxes. This equates to four $6,000 quarterly estimated tax payments.

*Important: Spend the money to consult with an accountant to fine tune your estimation — 30% is just a guide.

Pay yourself $4,667 per month while transferring an additional $2,000 per month to a tax savings account so that you can pay $6,000 in quarterly estimated taxes. 

Here’s how:

 

DailyWorth Split accounts

For more assistance with your money, bank accounts and investing for retirement, learn about Money Clarity, DailyWorth’s four-week eLearning program.

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