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Chapter
3

What do I need to open up my account?

It’s super important to figure out what business problems you are coming up against. Like first principles thinking tells us, you can’t solve a problem until you know what problems there are in the first place. Now that you know what solutions you’re looking for, you can find a banking product that aligns with your vision.

Before you begin the sometimes lengthy process that comes with applying for a bank account, let’s make sure you have all the paperwork and information you need to complete your application. This will streamline the application process and start you on the path to an organized freelancing business.‍

Gather the following information for a seamless setup

Business registration information

Professional freelancers register their business as an LLC, sole proprietorship, or S Corporation.

This is important because it legitimizes your business, provides an avenue for bank account setup and other important accounts and separates your business liability from your personal assets.‍

If you’ve already done this, gather your full business name and any registered DBA (doing business as).

Need to register your freelancing business? This playbook doesn’t dive too deep into it, but you can check your state’s requirements for business registration to learn more. Follow the steps yourself or consult a business attorney (any fees you pay here are tax deductible!). If you DIY the process, you’ll only pay the state registration fees (which can range from $50–$500+) and annual report costs if your state requires it. Using an attorney may add another $1,000+, but streamlines the process, which can take anywhere from 2–4+ weeks. 

EIN or UTR

In the US, an EIN (employer identification number) is a 9-digit number that identifies a business entity. ‍

An individual freelancer can use their EIN in lieu of an SSN (social security number) on W9 forms, direct deposit forms, bank account applications, and other business documentation.

Need an EIN? Start on this IRS page, select Apply Online Now, and follow the steps to get your number. Once your application is complete, you’ll get your EIN right away on a digital screen (save this number before exiting!). The IRS will then mail you a copy of your EIN information (this takes a few weeks).

Pro tip: You can apply for an EIN as an independent contractor without officially registering your business. If you decide to register your business down the line, it’s a good idea to discontinue your old EIN and apply for a new one. This helps maintain the liability separation a registered business provides.‍

In the UK, a UTR (unique taxpayer reference) is a 10-digit number that identifies a business entity. Register for the Self Assessment Tax Return system and you’ll automatically get a UTR.

Business address

To sign up for a bank account, you’ll need a business address. Checks from clients, delivery of supplies needed to complete your projects, and mail from the IRS need a place to go. 

What should your business address be? For some freelancers, your business address will be your home address. However, there are cases where someone cannot or does not want to use their home address as a business address (whether it’s wanting to keep your home address private, financial abuse in the home, or any other reason).

Instead, you can use a P.O. box, virtual business address (we like Business Anywhere, US Global Mail, or Earth Class Mail), or even the address of a local coworking space if they allow it.‍

Business contact details

Since many freelancers work independently, it’s common to use a personal cell phone number as a business contact. You can even deduct a portion of your phone bill on your taxes!

Getting a separate business phone is optional, but may be beneficial for freelancers that get a lot of phone calls. (This depends on the types of clients you work with.)

Your other business contact will be an email address. It’s a good idea to have a separate business email. The most popular options by far are Google Workspace (if you pay for a website like Squarespace, you may be able to increase your subscription package to include a business email) and Microsoft Outlook. Zoho Workspace is another option that is good for small-scale freelancers on a tight budget.

Just as a business bank account helps you separate business and personal finances, a business email helps you separate your business and personal obligations. 

…Plus, you’re more likely to see important business banking notifications if they’re not buried in your personal emails. ‍

Agreement to avoid off-limits industries, if applicable

Some banks have limitations on what industries they work with. The most common limitations are the cannabis and adult industries. Freelancers may have to sign a waiver that they won’t earn money from companies in these industries while banking with the institution (if you work in an industry that may have limitations, discuss this with the bank before signing on).

Example: Say you’re a freelance writer trying to open a bank account with a small, local institution that does not work with cannabis-adjacent small businesses (including freelancers who work with clients in that industry). You may have to sign a document stating you will not earn money from cannabis-related clients. Before you do, it’s important to do your research so you understand how this could limit your opportunities. Currently, medical and recreational marijuana makes up a $17.8 billion market and you may not want to be in a position where you cannot work with them.

Initial deposit

Some bank accounts have a minimum deposit or balance (up to or exceeding $500) while others let you start or keep an account at $0. Still, it’s a good idea to fund your business account with at least some padding-right from the start.

How much money should you have ready to fund your business checking account? This varies from person to person, but there’s a good way to figure it out. Add up all the debts your business will owe in the next month (health insurance, business insurance, legal fees, software subscriptions, etc.). Then, multiply it—by x2 if you have limited cash flow, and x3 if you have some wiggle room.

Example: If you forecast you’ll owe $1,000 in business costs over the next 30 days, put in $2,000–$3,000 as an initial deposit.‍

As clients start paying invoices and funding your new bank account, your cash flow will catch up. The “pay yourself first” mantra that freelancers love works in reverse here. Don’t give up too much cash from your personal account when funding a new business bank account.‍

Recap

  • You gathered your business registration info, if applicable.

  • You collected your EIN or UTN, business address, and contact info.

  • You did research on how off-limits industries might impact you.

  • You gathered funds for an initial deposit, making sure you have enough to cover biz expenses for ~2 months.

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