Why All Tutors NEED to Open a Business Bank Account
A lot of tutors start their businesses “on the side” and dive right in without even realizing they’re actually running a business! Does this sound familiar? Well, we’ve got some news: even with just one client, you are running a business!
One of the great things about becoming a tutor is that there is a low barrier to entry. You can decide to become a tutor and be up and running the next week.
So, do you really need a business bank account if you’re just starting small when you could simply keep track of your income and expenses in a notebook or spreadsheet? The answer is YES!
Here are 3 Reasons Tutors NEED a Business Bank Account!
1. Legitimacy
Opening a bank account for your business legitimizes your business to the IRS. The IRS likes to see that businesses have a business account. If you ever get audited, it’s going to be much easier to prove business expenses if they’ve all gone through your business bank account.
(Always be sure to talk to a tax professional when it comes to taxes and financial planning.)
2. Ease
Having a bank account solely dedicated to your business makes it easier for you to keep up with your expenses.
In the beginning, you might not have a lot of expenses or a lot of income and it might seem easier to just track what’s coming in and out of your personal bank account on a spreadsheet. We promise you, this is not easier. If you open a bank account where only your tutoring income comes in and only your tutoring expenses come out, tracking everything will be so much easier!
You will have a very clear picture of how much income is coming in and how much you are spending to run your business.
3. Confidence
Having a bank account will signal to you that you are a business owner.
Why does that matter? It can be very difficult for teachers to make the switch in their brains from being an educator to being an educator who owns and runs a successful business.
A business owner has to do some hard things, like:
- Feeling confident in their policies and fees
- Have conversations about fees
- Raising their fees (Learn more about raising your rates. Read 3 TIPS TO RAISE YOUR RATES WITH CONFIDENCE.)
As teachers, we’re used to doing all the things and going above and beyond, knowing that we won’t get paid for it. As business owners, we need to get comfortable speaking about money and asking for what we know our services are worth.
Having a bank account for your business can be one of the first steps in helping us teachers shift our mindset around money and step into our confidence as business owners.
This mindset shift will also guide you in establishing your policies around lateness, missed sessions, and rate increases. We call this the CEO Mindset and setting up your business bank account is one of the first steps you can take to get there.
Opening Your Business Bank Account
As soon as you receive your first payment as a tutor, you are a sole proprietor. As a sole proprietor, you can go to the bank and open up a business bank account.
You can choose to do this one of two ways:
- Open a business bank account under your name.
- Open a business bank account under your business’ name.
You can simply go to the bank you already use and ask them what is needed for you to open a business bank account. (You can also look at different banks to compare their products and services for small businesses.) Different areas may have different requirements. If you check with your bank first, you’ll make sure not to miss any documents that will be required… then you’ll be on your way!
Want to dig deeper into this topic? Check out the Financial Planning for Small Business Owners masterclass with expert, Wendy Aimola in Members Academy!
Business Bank Accounts… Does a Tutor Really Need One? YES!
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