Hello-I have begun selling cakes and cake balls out of my home to friends, co-workers, etc. I do have a city license to do so (there are specifics of what I can and cannot sell, etc). I have also submitted a business tax application to make sure I am covered in that area. I do this for fun, as I have a full-time job that pays the bills. I do not intend to become rich off of this. The question I have to those of you who may be in the same situation is, should I open up a separate checking account for my little business? I believe the other option is to use my social and combine it with my personal account. I hadn't given any of this much thought until today when I was paid with a check that was written out to the name I have given my little business. Since the business tax application hasn't gone through, it's really a fictious business, which means I cannot cash or deposit the check. I do not feel comfortable asking for the customer to make out a new check with my name on it. I can hold onto the check until an official business account can be set-up or I can combine it with my own account, as it being a DBT (daily business transaction), in which they will add my ficticious name to the account. I think that is what the bank was saying when I called and asked questions about the check I have. Sorry this is so long, but it's hard for me to explain. Does anyone have any suggestions or insight? Thanks!
Why wouldn't you have a separate business account? Have you done any research on having running a business at all? I suggest you start there. Even though this is still a "hobby", it's still a "business", which means you need to keep accounting records, report your income and pay taxes to your city, state and to the Feds.
A lot of people just like you get themselves in a lot of trouble because they do not do any research or attempt to learn how to operate or manage a business. There can be significant financial consequences to you personally if you don't do this right.
SCORE is an excellent resource. Start there to learn what you need to do as a business owner.
It is so diffcult to keep track when you co-mingle funds. I have been self-employed all of my adult life. One easy practice is to have two separate business accounts. Put every penny of business revenue into one account (revenue account) and transfer the funds as needed to a working account. At the end of the year, you will have every deposit on record, the revenue account should exactly match the yearly income from the business, and that account will also have your profit in it. Expenses and wages will match the total deposits in the working account less the ending balance (profit).
Be sure to keep a separate record of wages and any withdrawals that are personal in the working account.