Is there an easy way to establish direct deposit when you work for yourself?

Here is some useful information.

Excerpt:
“Sole proprietors are considered self-employed and are not employees of the sole proprietorship. They cannot pay themselves wages, cannot have income tax, social security tax, or Medicare tax withheld, and cannot receive a Form W-2 from the sole proprietorship. They may receive a draw from the sole proprietorship and must pay quarterly federal estimated tax payments to cover the amount of federal income tax and self-employment tax liability they will have, unless covered by withholding on other income. Vision Payroll can work with you and your CPA to determine an appropriate draw and estimated tax payment schedule. You can then receive the draw as a check or direct deposit with each payroll and schedule appropriate deductions such as retirement plan contributions.”

You have to set it up with a payroll service to do it, I think.

Thanks for the response, I’m not interested in a W2, or withholding wages for taxes, etc. I am just looking for a way to meet the requirement of direct deposit for a high interest bearing banking account.

I wasn’t sure if anyone had done this utilizing other financial institutions such as paypal or ING.

The way I am paid, will not really allow me to deal with a payroll company, as it is normally feast or famine, for example I may bring in 25,000$ this month, and 0$ the following month.

Talk to someone at the credit union. Because they’re smaller than banks and member-owned, they can often make exceptions in cases like this.

If you have a business checking account at the bank you could set up an automatic transfer from that account into the high interest bearing account.

If your business account is at a separate financial institution you could also set up an automatic draft between banks – I do that. It goes from a stock brokerage company/bank to my regular bank. The cost is $10 per transfer.

Would either of those scenarios work?

Indeed, you should have separate checking accounts for business and personal use, otherwise the IRS will have a field day with ya at some point in time.

Once you opened a business checking account you can DD yourself.

Paying $10 a transfer to get Direct Deposit so that you can qualify for an interest-bearing checking account is like buying a $200 metal detector so you can find lost change at the park.

@cwilbur

Depends on the deposit of course. If he/she wants to put 100k into that high-interest account it may become interesting again.

Ours is only $1800 or so at a time, but it is still worth it to us due to availability and covering one’s bases in case of a recession (should such a thing ever happen).

Thanks for all the input, what exactly is required to open a business checking account, and can that account be used against me by the IRS at any point?

Would I need to be able to explain every dollar in that account?

I have yet to form an LLC or a separate legal entity as a business, and use my SS# as my tax ID number for businesses to give me tax forms. Would anyone suggest forming an LLC, SCORP, etc? If so, why?

If i have to spend 10$ per transaction, that will be fine, but I’m cheap, and the saying goes… a dollar saved… you know :)

@JonesIn

These are all very “ambiguous” questions. It really all depends on what you do for a living.

First, to open a business checking account, most banks will ask you for an “Employer Identification Number”. You can get one at the IRS website within 20 minutes here. It’s basically a social security number for businesses, and doesn’t mean you have to employ someone. Often, local banks will also ask for your business license.

For all these little annoyances I strongly recommend browsing the Small Business Administration’s websites. They have a wealth of useful information and procedural guides. They even have volunteer teams of business owners guiding people through the necessary steps for free!!!

In my opinion, the SBA is one of the most unrecognized and underutilized federal agencies, they can really help you with this sort of stuff.

Generally, forming “some” sort of legal entity that protects you personally from liability is always preferable. First of all, one would need to know which state you are in, as the states determine “corporate law”. Further, since you seem to work on your own, a corporation (in many states even an S-Corporation” will most likely be overkill, since you burden yourself with a “separate” person that has to file taxes quarterly, pay many taxes in advance, and very formally has to employ you and run payroll for you.

One thing holds true though, even even you don’t incorporate in any form, you should always separate personal from business in bank accounts.

Customer payments should never be deposited in the same account where you buy your toothpaste and bagels from with your debit card, because it is A) very confusing, and B) makes it very easy for the IRS to later on reject deductions because they appear to be for “personal” uses.

@TaoSan

I am a video communications consultant – I produce commercials, training videos, informative pieces etc, predominately for 1 client.

Thanks for the links, I’ll be sure to do some due diligence in understanding each of these.

I live and work in North Carolina, I’ve heard alot about LLC’s from a variety of small business owners, just haven’t bit the bullet to pay a lawyer the 800.00$+ to file all the correct paperwork, and I must admit I am still unsure which type of business to form, with my primary needs being the best legal protection / least taxation ~

I have been treating the checks I recieve from my clients as “payroll” checks thus far as I am relatively new to the independent contractor thing. I was also told that as a 1099 worker that I have more tax advantages to not forming a business, with write-offs etc, but I am still unsure of their “knowledge” in that area.

I understand the different accounts, I’ve been using quick books to manage a single account, as in dividing up what is personal or business. I do wish to be as protected as much as possible from the government.

Thanks again for the input,

Sorry for being short on this response, I got some work to do. My businesses started from a similar 1099 background, although in another field. I’ll write some more later today, one thing though, everything a lawyer can do for you and will charge you for, you can receive free from the SBA.

When it comes to business formation for sole proprietors or small-businesses I think it is throwing money out the window using a lawyer for it. (Personal opinion of course, save the lawsuit :).

I have long since given up lawyers for standard formation and SOP questions, as the (reliable) info you need is freely available without someone charging you hundreds of bucks for some forms.

I didn’t realize I could do it without a lawyer! Thats awesome, look forward to hearing what you have to say later today.

In our state to set up a business account at a bank you basically need to go down to the courthouse and pay $10 to get a DBA certificate (DBA = Doing Business As). As a sole proprietor you then use your social security number as your Employer Identification Number. Then you present both the DBA certificate and the EIN ( your social, which the bank already has if you have other accounts there) and voila, you get a business account. You then put all monies you get into that account and pay for all business expenses out of that account.

This doesn’t give you the kind of legal protection you would get by incorporating in some manner, but it makes it very clear for the IRS what is business income and expense and what is your personal money.

And as TaoSan says, as a sole proprietor it is relatively easy to set up your business. Another place to go for information is actually your state’s website. You should start at http://www.secretary.state.nc.us/corporations/indxfees.asp

Okay,

basically, you are a 1099 service provider. You’re services do not have any special “liabilities” attached to them. Special liabilities would be a doctor’s risk of malpractice for example.

This means, that if you were to decide to found an LLC, which is basically the most feasible liability limitation for you, you will not need some company charter drafted by a lawyer to protect you from special liabilities.

This means you can pretty much go with a simple off the shelf LLC. A lawyer will of course want to make his buck, and therefore couple the whole thing with a one-time consultation, document preparation and submission and what not.

Since you have no special circumstances that require any “exceptions” in forming your LLC you might as well go to LegalZoom and let them send you a package.

If you decide to do so, you have achieved two very important things:

a) You got rid of personal liability in case you get sued, go bankrupt, or any of the niceties due to you if Murphy’s law is right should occur.

b) You now have the burden of dealing with the IRS as two people. You personally, and the company, which of course doubles your administrative burden.

I gotta be careful here not to give “legal advise” as of course I am not a legal professional. Therefore, I’d strongly advise you to set up an appointment at your local Small Business Association or Chamber of Commerce. They will provide the very same services a lawyer does, with very few exceptions.

- At the lawyer’s, you’ll get a coffee and sit at a nice desk
– At the chamber of commerce they may have a vending machine and a group office
– At the SBA you’ll pull a number, sit at a counter-like thing with a sign no food or drinks

- At the lawyer’s they’ll make you fill out the papers yourself and mail them to the secretary of state’s office for you. If not, they have their typist fill them out for you for a huge fee.
– At the chamber of commerce they help you fill out the papers, might mail them for you for a small fee, and try to enroll you.
– At the SBA they show you how to fill them out, and make you mail them yourself.

- At the lawyer’s they charge you 1,000 to 2,000 bucks for it
– At the chamber of commerce they charge you around 200 for it
– At the SBA you fare free

Since you don’t do anything “exceptional”, the quality of “counseling” will be the same at all three of the above.

Now, my preferred approach would be to found an LLC via here Because they have the most comprehensive information package attached to their service.

Other than that, I can really only strongly emphasize to see what your local SBA has to offer. They have a wealth of good information, and are usually really keen on networking you with potential clients or one of their business mentoring networks.

When I founded my first company, I always thought blah, Fed Agency, what might they have to offer, and I never worked with them before I founded my second company. They really helped me tremendously in determining what type of incorporation was suitable, and had plenty of workshops that were really really helpful. I even got a few customers through them.

I hope this helped a bit.

Good luck with your ventures!

@Darwin

Thanks alot for the information, I will definately check into the link you provided. I didn’t realize it was that “simple” to get a DBA, which raises a host of other questions,

Such as, if I start doing business as XYZ, can i carry that name forward to create a LLC?

@TaoSan

Thanks again for all the help, I’ve heard of Legal Zoom before, and I believe this to be the best way to go.

Loved the comparison of the lawyers office to the SBA, great stuff.

In going to the SBA do I need bring things with me, such as a business plan, etc? I’ve essentially been in business for around 6 months or so, just looking for separation between myself and my business.

I’ll have to admit, when you recommended a federal agency I thought you were a bit crazy, every interaction I’ve had with the government thus far has been pretty painstaking.

Good luck to you as well, Thanks again for the detailed responses.

No, you don’t need a business plan to just form an LLC. Business plans become interesting of course when you decide to loan money, apply for a grant or anything to that effect.

The SBA is a) The first place you go to to apply for such things, and b) has workshops on….guessed it?......yes, writing business plans.

I’ve noticed one thing about them. After all, they are federal bureaucrats, so if you’re trying to figure out the what, whens and where’s on their website, everything gets a bit confusing and redundant. So the best thing is really to call your local office and tell the operator you want to form a company, they can best route you to whatever programs you have available.

As for taking the name over, changing it later on and whatnot, you can pretty much change your name to anything you like as often as you like, s long as you don’t infringe on an existing name or a registered trademark.

I haven’t done any research on ND, but it is usually as simple as filing an amendment to your business charter with the secretary of state.

As for “separation”, yes that is exactly what you want; and that for one simple fact. At your current situation, you are fully liable with anything you have and will have in the future down to the last cent.

There is a plethora of things that can go wrong, even the most stupid unpredictable things, and now you, the person is liable. That means,e.g. if some nutcracker anywhere along the line decides to sue you, you’ll be fending off a lawsuit with your personal assets. And believe me, frivolous suits are around, you just haven’t met them yet.

I remember in my second year doing business, I had my website redesigned to look reeeeally big and corporate, and I did look like a billion bucks corporation on that site.
The intro flash movie had a strobe-like flashing sequence of about five seconds. About half a year later I got sued by some cracker-jack claiming he had fallen into a seizure from “looking at my website”. Everybody everywhere knew it was frivolous/ridiculous. Nevertheless, it cost me 15 Grand in legal fees to agree with all the lawyers, and judges and mediators that it was frivolous.

If something like that happens to you and you’re not incorporated in any way, the liability is all with you.

So, yes, a “total” separation” of you and your employer company You Inc. is definitely the goal here. Why? Because if any of the weird/crazy/ridiculous things the universe may throw at you happens, you can (worst case scenario) close shop, and walk away from it unscaved. As in, no debt personally, no bad credit personally, no judgements personally, etc. etc. etc.