Small business banking/financial questions?

Question by asminty: Small business banking/financial questions?
I’m starting my own business as a Pure Romance consultant, which means that I will be buying products from the company and sell them directly to women for a profit. I will not be an employee of Pure Romance, and there will be no other employees in my small business.

I have the sales side figured out, but what do I need to know from the business side? My plan now is to open a separate free personal checking account for my business transactions, because the business accounts I’ve researched have fees, minimum balances and transaction limits, and until I know how the business will do I don’t want to sign up and get stuck with fees because I’m under- or over-performing. So on this account I will deposit my initial investment [which I have in savings now], and from there it will be used for purchases from Pure Romance, gas and other deductible expenses, and all of the company’s income will go into that account. At least from what I understand it makes the most sense to stick with a free personal checking account? Are there benefits to the actual business account that I’m not considering?

I plan to sit down with a CPA in the next few weeks to figure out exactly what would be a deductible expense…gas obviously because the job requires me to drive to women’s houses all over the city, but what about oil changes and other car maintenance, and even like clothes and makeup so that I can look the part of the sophisticated 21st century sexually liberated woman?

And how do I pay myself? Would I be allowed to just transfer money from the “business” account to my personal as I choose, or do I have to give myself a salary?

anything else I should know?

Best answer:

Answer by zeuz
You have the right approach. Definitely, keep business and personal revenues and expenses separate.

Concerning paying yourself, anytime you pay yourself money, it is called a “draw”. (Your CPA will explain this to you.) You may take a draw anytime you want.

Concerning expenses, I have found that taking the mileage deduction is essentially better than tracking gasoline, oil changes, etc. To get the mileage deduction (which is about $ 0.50 / mile), you need to keep a journal of where you went, why you went there, and how many miles, etc. (Your CPA will give you better instructions.)

Concerning other important considerations, if your income is substantial, you may want to set up a 401k / profit sharing plan for yourself. Fidelity Investments “Self-Employed 401k” is a fine option, and it’s free.

Concerning quarterly estimated tax payments, you will need to consult with your CPA at least 4 times per year to make sure you pay the correct estimated tax each quarter. You may want to hire a bookkeeping service, if your recordkeeping becomes cumbersome. (Bookkeeping services charge about $ 20 to $ 40 per hour; anticipate 2 hours per month — which will save you expenses on your CPA, who is probably charging you $ 150 / hour.)

Know better? Leave your own answer in the comments!