So I finally landed my first client for my freelance design gig (super exciting!). They paid the 50% deposit via PayPal to my personal account because I haven't set up a business bank account yet. Now I'm worried about how to handle this, should I just transfer it to a new business account once I open one, or is there some tax rule I'm missing? I want to do this right but I'm not even sure where to start. Any advice?
Payments
My first client paid before I opened a business bank account
Open the business account ASAP and transfer the funds. Mixing personal and business money is a headache later. The bank will ask where the deposit came from—just explain it's your first client payment. No big deal.
lol you're overthinking it. Just cash the check and move on. The IRS doesn't care which account holds the mondy as long as you report it.
Actually,it does matter for liability protection. If you're a sole prop, personal vs business account is less critical, but if you form an LLC you need to keep them separate to maintain the corporate veil. Also, some banks require a business license to open an account, so call ahead.
Thanks! I'm a sole prop for now. I'll open a business account this week. Should I mention the PayPal payment to the bank?
Only if they ask. Banks seee this all the time. Just don't try to deposit a $10k cash wad without explanation.
Wait, you already got paid? Nice. I'm still waiting on my first client to pay. They keep saying 'the check is in the mail' since March.
One more thing: keep a record of that dposit in your bookkeeping. Even if it's just a spreadsheet, note the date, amount, and client. It'll make tax time easier.
Also, PayPal might report it on a 1099-K if it's over $600. Check your state's rules. But for one payment, probably not.
Good to know. I'll set up a simple spreadsheet. Appreciate the help, everyone!