55 posts tagged with "small business"

If you've heard the term "per diem" tossed around in business conversations but aren't quite sure what it means or how it applies to your company, you're not alone. This Latin phrase, which translates to "per day" or "for each day," has important implications for how you manage both your workforce and business expenses.

As a small business owner, understanding per diem can help you make smarter hiring decisions and streamline your expense management processes. Let's break down everything you need to know about per diem in business contexts.

What Does Per Diem Mean?​

At its core, per diem simply means "by the day." In business, this term applies to two distinct scenarios:

1. Per diem employees – workers who are hired on a daily, as-needed basis
2. Per diem reimbursements – daily allowances provided to employees for business travel expenses

Both applications can offer significant advantages to small businesses when used strategically.

Per Diem Employees: Flexible Workforce Solutions​

Unlike traditional full-time or part-time employees who work regular, ongoing schedules, per diem employees are brought in on a day-by-day basis when additional support is needed.

When to Use Per Diem Workers​

Small businesses typically hire per diem employees in several situations:

Covering gaps in coverage – When regular employees are out sick, on vacation, or taking personal leave, per diem workers can step in to maintain operations.

Managing unexpected staffing shortages – If an employee leaves suddenly or you're between hires, per diem staff can bridge the gap.

Handling seasonal demands – During busy periods or for special projects, per diem workers provide the extra hands you need without long-term commitments.

Testing before hiring – Per diem arrangements can serve as extended trial periods to evaluate whether someone is a good fit for a permanent position.

While per diem employees are commonly associated with healthcare (nurses) and education (substitute teachers), small businesses across industries use them for administrative support, creative projects, warehouse operations, event staffing, and specialized consulting.

How Per Diem Employment Works​

Here's what makes per diem employment unique:

Fixed daily rate – Per diem workers typically negotiate a set daily rate before accepting an assignment. This rate is paid regardless of whether they work two hours or eight hours, though labor laws around minimum wage and overtime still apply.

No guaranteed hours – Unlike regular employees, per diem workers don't have guaranteed schedules. They're called in when needed and may go weeks without work from a particular employer.

Flexibility for both parties – Businesses gain workforce flexibility, while workers can accept or decline assignments based on their availability.

Example in Action​

Imagine you run a boutique marketing agency and land a large project requiring extensive graphic design work over a two-week period. Your in-house designer can handle the normal workload, but this project requires additional support.

You hire a per diem graphic designer at a rate of $400 per day for ten working days. Some days the designer finishes in five hours; other days require nine hours. Regardless of the hours worked, you pay the agreed-upon$400 daily rate (though you'd owe overtime if hours consistently exceed eight per day, depending on your jurisdiction).

Per Diem Travel Reimbursements: Simplifying Business Travel​

The second application of per diem involves travel expense reimbursements. Instead of requiring employees to track and submit receipts for every meal and expense during business travel, many companies establish a daily allowance.

How Per Diem Travel Expenses Work​

Set a maximum daily rate – Your company determines the maximum amount employees can spend per day on travel-related expenses. This typically covers lodging, meals, and incidental expenses.

Provide upfront or reimburse – Some companies advance the per diem amount before travel; others reimburse afterward.

Simplified expense tracking – Employees don't need to collect receipts for every coffee or meal, as long as they stay within the daily allowance.

Federal Guidelines and Tax Implications​

The U.S. General Services Administration (GSA) publishes federal per diem rates that vary by location. While businesses aren't required to follow these rates, there are tax implications for exceeding them.

Within GSA rates – Reimbursements at or below GSA rates are generally not considered taxable income to employees.

Above GSA rates – Any amount exceeding GSA rates is treated as taxable income and must be reported on employees' W-2 forms.

For example, if the GSA per diem rate for a city is $180 per day, but your company offers$250 per day, the $70 difference is taxable income for the employee.

Example in Action​

Your sales representative travels to a conference in Chicago for three days. You've established a per diem rate of $200 per day, totaling$600 for the trip. Instead of collecting receipts for every meal and taxi ride, your employee simply ensures their daily spending stays under $200. They submit a brief expense report summarizing their costs, and you reimburse the full amount.

Key Benefits of Using Per Diem​

For Per Diem Employees​

Cost efficiency – You only pay for the labor you actually need, when you need it. There's no obligation to provide consistent hours during slow periods.

Reduced overhead – Per diem workers typically don't receive benefits like health insurance, retirement contributions, or paid time off, reducing your overall employment costs.

Built-in flexibility – Scale your workforce up or down based on current demands without the complications of layoffs or understaffing.

Specialized expertise – Hire specialists for specific projects without committing to full-time salaries for skills you only need occasionally.

For Per Diem Travel Reimbursements​

Simplified administration – Less paperwork, fewer receipts to review, and streamlined expense report processing.

Predictable budgeting – You know exactly what each day of business travel will cost, making budget planning more straightforward.

Employee convenience – Your team doesn't need to front large amounts of money or save every receipt, reducing stress around business travel.

Faster reimbursement – Without extensive receipt verification, you can reimburse employees more quickly.

Best Practices for Implementing Per Diem​

For Hiring Per Diem Employees​

Research competitive rates – Survey your local market to understand going rates for per diem work in your industry. Offering competitive compensation helps attract quality talent.

Provide clear expectations – Even for one-day assignments, clearly communicate what needs to be accomplished, what resources are available, and what success looks like.

Respect their professionalism – Treat per diem workers with the same respect as regular employees. You may need their services again, and word-of-mouth matters.

Set them up for success – Provide necessary access to tools, systems, and information. A few minutes of onboarding can dramatically improve productivity.

Maintain a roster – Build relationships with reliable per diem workers who can step in when needed. Having a "bench" of trusted talent makes last-minute scheduling easier.

Comply with labor laws – Remember that per diem employees are still subject to minimum wage laws, overtime regulations, and workplace safety requirements.

For Per Diem Travel Reimbursements​

Establish clear policies – Document your per diem rates, what expenses are covered, and how employees should report spending.

Consider location-based rates – Travel to New York City costs more than travel to smaller cities. Consider adjusting rates based on destination.

Require expense reports – Even without receipts, employees should submit reports summarizing how they spent their per diem allowance. This documentation is crucial for tax purposes.

Provide advances when possible – Requiring employees to front hundreds of dollars for business travel can create financial hardship. Providing per diem advances alleviates this burden.

Review and adjust regularly – Periodically evaluate whether your per diem rates remain reasonable as costs change.

Separate categories if needed – Some businesses set different rates for lodging versus meals and incidentals, giving more specific guidance.

Common Pitfalls to Avoid​

Misclassifying workers – Ensure per diem workers are properly classified as employees (not independent contractors) if you control their work methods and schedule. Misclassification can result in penalties.

Ignoring overtime – Just because someone has a daily rate doesn't exempt them from overtime laws if they work beyond standard hours.

Setting arbitrary rates – Base your per diem rates on market research and actual costs, not guesswork.

Lacking documentation – Even with simplified per diem processes, maintain proper records for tax and compliance purposes.

Treating per diem workers poorly – Creating a negative experience means talented workers won't be available when you need them again.

Is Per Diem Right for Your Business?​

Per diem arrangements work well when:

• Your business has fluctuating staffing needs
• You need specialized skills for specific projects
• You want to test-drive potential employees
• Your employees travel regularly for business
• You want to simplify expense management
• You need coverage for employee absences

They may not be ideal when:

• You need consistent, reliable daily coverage
• The learning curve for new tasks is steep
• Positions require deep institutional knowledge
• You're in a location with limited per diem talent
• Your business rarely involves travel

Moving Forward with Per Diem​

Whether you're considering per diem employees or travel reimbursements, the key is implementing these arrangements thoughtfully. Take time to research appropriate rates, establish clear policies, and communicate expectations clearly.

For many small businesses, per diem arrangements offer the perfect balance of flexibility and structure. They allow you to access the talent and resources you need while maintaining lean operations and predictable costs.

Start small—perhaps with a single per diem hire for a upcoming project or implementing per diem travel reimbursements for your next business trip. As you become more comfortable with these arrangements, you can expand their use strategically throughout your business.

Remember, the goal isn't to replace your core team with per diem workers, but to complement your regular workforce with flexible solutions that help your business operate more efficiently and adapt to changing demands.

Have questions about implementing per diem arrangements in your business? Consider consulting with a human resources professional or accountant to ensure you're handling compensation, taxes, and compliance correctly for your specific situation.

Running a taxi or ride-hail business means you're not just a driver—you're an entrepreneur managing your own small business. While your focus is on providing excellent service to passengers, keeping your finances organized is crucial for long-term success and maximizing your take-home income.

Understanding Your Unique Financial Landscape​

Taxi and ride-hail drivers face distinct financial challenges that traditional employees don't encounter. You're responsible for tracking multiple income streams, managing business expenses, setting aside money for taxes, and maintaining accurate records—all while spending most of your time behind the wheel.

The complexity increases if you work across multiple platforms like Uber, Lyft, or traditional taxi services. Each platform has different payment schedules, fee structures, and reporting systems, making it essential to have a solid financial management strategy.

Maximizing Your Tax Deductions​

One of the biggest advantages of being self-employed is the ability to deduct legitimate business expenses from your taxable income. However, many drivers miss out on significant deductions simply because they don't track them properly.

Essential deductions for taxi drivers include:

Fuel and oil costs represent one of your largest expenses. Keep detailed records of every fill-up, or use the IRS standard mileage rate, which factors in fuel, depreciation, and wear and tear.

Vehicle maintenance and repairs are fully deductible. This includes oil changes, tire replacements, brake work, and any other maintenance needed to keep your vehicle road-ready.

Insurance premiums for your vehicle, including any additional coverage required for commercial use, can be deducted. Make sure you have proper commercial insurance, as personal auto policies typically don't cover paid passenger transport.

Registration fees, license renewals, and any special permits required for taxi or ride-hail operations are deductible expenses that add up over the year.

Depreciation or lease payments allow you to recover the cost of your vehicle over time. If you purchased your car, you can claim depreciation. If you're leasing, those monthly payments are deductible.

Car washes and detailing expenses are necessary to maintain a professional appearance and keep passengers comfortable. Save those receipts.

Phone and data plans are essential tools for your business. If you use your phone exclusively for work, the entire bill is deductible. If it's mixed personal and business use, deduct the business portion.

Bank and credit card fees related to your business accounts or payment processing are deductible operating expenses.

Setting Up Your Record-Keeping System​

Effective record-keeping doesn't have to be complicated, but it does need to be consistent. The key is establishing a system early and sticking to it.

Create separate accounts. Open a dedicated business checking account for your taxi income. This separation makes it infinitely easier to track business income and expenses come tax time. Similarly, consider getting a business credit card used exclusively for vehicle-related expenses.

Track mileage diligently. Whether you use the standard mileage rate or actual expense method, maintaining accurate mileage logs is crucial. Note your odometer reading at the start and end of each shift, and keep a log of all business-related trips. Many smartphone apps can automate this process using GPS tracking.

Save every receipt. Develop a system for capturing and storing receipts. Take photos with your phone immediately after making purchases, or use expense-tracking apps that allow you to snap and categorize receipts on the go.

Reconcile accounts regularly. Set aside time weekly to review your income and expenses. This regular check-in helps you catch errors early and gives you a real-time picture of your business's financial health.

Managing Multiple Income Streams​

If you drive for multiple platforms, organization becomes even more critical. Each platform has different payment schedules, fees, and reporting structures.

Separate your earnings by platform in your records. Create different categories for Uber, Lyft, traditional taxi service, or any other income sources. This separation helps you understand which platforms are most profitable and makes tax reporting clearer.

Understand each platform's fee structure. Different services take different percentages, and some charge additional fees. Knowing the true net income from each platform helps you make informed decisions about where to focus your time.

Download and save all platform statements. Most ride-hail companies provide detailed weekly or monthly summaries. Save these documents, as they're valuable records for tax time and can help verify your income if questions arise.

Planning for Taxes Throughout the Year​

Unlike traditional employees who have taxes withheld from each paycheck, self-employed drivers must handle their own tax obligations. This means making quarterly estimated tax payments to avoid penalties.

Calculate your estimated tax liability. As a general rule, set aside 25-30% of your net income for taxes. This covers federal income tax, self-employment tax, and state income tax (if applicable). Your exact percentage depends on your total income and tax bracket.

Make quarterly estimated payments. The IRS requires self-employed individuals to pay taxes quarterly if they expect to owe $1,000 or more. Mark these deadlines on your calendar: April 15, June 15, September 15, and January 15.

Understand self-employment tax. In addition to income tax, you'll pay self-employment tax (covering Social Security and Medicare), which is roughly 15.3% of your net earnings. Traditional employees split this cost with their employer, but as a self-employed driver, you're responsible for the full amount.

Tracking Cash vs. Digital Payments​

Many taxi drivers handle both cash fares and electronic payments. This mixed payment environment requires careful attention to ensure all income is properly recorded.

For cash payments, record each transaction immediately in a logbook or smartphone app. It's easy to forget cash transactions by the end of a busy shift, so real-time tracking is essential.

For digital payments through ride-hail apps or credit card processing, reconcile your bank deposits against the platform's reports. Be aware of fees deducted by platforms or payment processors—these are business expenses you should track.

Consider the timing of deposits. Ride-hail platforms often hold funds for a day or two before depositing them. Understand each platform's payment schedule to accurately track when income is received.

Budgeting for Vehicle Maintenance and Replacement​

Your vehicle is your business's primary asset, and proper maintenance extends its life while ensuring passenger safety and comfort.

Create a maintenance reserve fund. Set aside a portion of your monthly income specifically for vehicle maintenance and repairs. Unexpected repairs can devastate your finances if you're not prepared. A good rule of thumb is to reserve 10-15% of your gross income for vehicle-related costs.

Follow your manufacturer's maintenance schedule religiously. Regular oil changes, tire rotations, and inspections prevent costly major repairs down the road. Preventive maintenance is always cheaper than emergency repairs.

Plan for vehicle replacement. High-mileage driving means you'll need to replace your vehicle more frequently than the average driver. Start saving for your next vehicle early, putting aside money each month toward this inevitable expense.

Leveraging Technology for Financial Management​

Modern technology offers powerful tools to simplify financial management for taxi drivers.

Expense tracking apps can automatically categorize purchases, store digital receipts, and generate reports. Many integrate with your bank accounts for seamless tracking.

Mileage tracking apps use GPS to automatically log business

Running a successful tattoo business requires more than just artistic talent and a steady hand. Behind every thriving tattoo studio is solid financial management that keeps the business profitable and compliant. Whether you're a solo artist or managing a full studio, understanding the financial side of your business is crucial for long-term success.

The Unique Financial Landscape of Tattoo Artistry​

The tattoo industry operates differently from traditional businesses. You're juggling multiple income streams—hourly rates, flash sales, deposits, merchandise, and possibly booth rentals if you have other artists working with you. Add to that the complexity of tracking supplies, equipment depreciation, and industry-specific tax regulations, and financial management can quickly become overwhelming.

Many tattoo artists start their careers focused entirely on perfecting their craft, only to find themselves struggling with spreadsheets and tax forms later on. The good news? With the right systems and knowledge, managing your finances doesn't have to be a nightmare.

Essential Tax Deductions Every Tattoo Artist Should Know​

One of the biggest mistakes tattoo artists make is missing out on legitimate business deductions. Here are the key expenses you should be tracking:

Studio and Equipment Expenses

• Tattoo machines, power supplies, and pedals
• Needles, tubes, and grips
• Inks and pigments (all colors and brands)
• Cleaning and sterilization supplies
• Disposable gloves, barriers, and protective equipment
• Furniture like tattoo chairs, workstations, and waiting room seating
• Studio rent or booth rental fees

Professional Development

• Workshops and conventions
• Trade shows and networking events
• Books, magazines, and online courses
• Membership dues for professional organizations

Marketing and Business Promotion

• Website hosting and design
• Social media advertising
• Business cards and promotional materials
• Photography services for portfolio shots
• Instagram ads and sponsored posts

Operational Costs

• Business insurance (liability and property)
• Health permits and business licenses
• Utilities if you own your space
• Software subscriptions for booking and client management
• Credit card processing fees

Home Office Deduction If you work from home or do design work at home, you may qualify for a home office deduction. This allows you to deduct a portion of your rent, utilities, and internet based on the percentage of your home used exclusively for business.

Organizing Multiple Income Streams​

Tattoo artists often have diverse revenue sources, and keeping them organized is essential for accurate bookkeeping and tax preparation.

Client Services Track your tattoo income separately by service type when possible. This might include:

• Custom pieces (hourly or flat rate)
• Flash designs
• Cover-ups
• Touch-ups and corrections
• Consultations

Retail Sales If you sell merchandise, art prints, or aftercare products, maintain separate records for these sales. This helps you understand which revenue streams are most profitable and may have different tax implications.

Deposits and Cancellations Create a clear policy for deposits and document how you handle cancellations. Some artists keep deposits if clients no-show, while others apply them to future work. Your accounting method should reflect your actual policy.

Booth Rentals If you rent space to other artists, this is typically considered rental income and should be tracked separately from your service income.

Cash vs. Accrual Accounting: Which Method is Right for You?​

Choosing the right accounting method affects how you report income and expenses.

Cash Method The simpler option for most independent tattoo artists. You record income when you actually receive payment and expenses when you pay them. This method provides a clear picture of your cash flow and is generally easier to manage.

Accrual Method More complex but required for some businesses. Income is recorded when earned (even if not yet received) and expenses when incurred (even if not yet paid). This method is typically necessary if you carry inventory for resale, have complex billing, or exceed certain revenue thresholds.

Most solo tattoo artists and small studios work well with cash-based accounting, but consult with a tax professional to determine what's best for your specific situation.

Managing Cash Payments in a Digital World​

Tattoo artists often receive substantial cash payments, which can complicate bookkeeping and raise red flags with the IRS if not properly documented.

Best Practices for Cash Handling:

• Deposit all cash into your business account promptly
• Issue receipts for every cash transaction
• Never use business cash for personal expenses without proper documentation
• Keep a detailed log of all cash transactions
• Consider the security risks of keeping large amounts of cash on hand

The IRS pays special attention to cash-intensive businesses, so meticulous record-keeping is your best protection during an audit.

Setting Up Your Business Structure​

Your business structure affects your taxes, liability, and paperwork requirements.

Sole Proprietorship The simplest structure where you and your business are legally the same entity. Easy to set up but offers no personal liability protection.

LLC (Limited Liability Company) Provides liability protection while maintaining relatively simple tax treatment. Most independent tattoo artists who want to protect personal assets choose this structure.

S-Corporation More complex but can provide tax savings for high-earning artists by allowing you to split income between salary and distributions. Requires more paperwork and formality.

Each structure has different implications for self-employment taxes, liability protection, and administrative requirements. Consult with a business attorney or accountant before making this decision.

Quarterly Estimated Tax Payments​

As a self-employed tattoo artist, you're responsible for paying income tax and self-employment tax throughout the year, not just at tax time.

Key Points:

• Federal quarterly taxes are typically due April 15, June 15, September 15, and January 15
• Set aside 25-30% of your income for taxes (or work with an accountant to determine your rate)
• Underpayment can result in penalties and interest
• State quarterly taxes may also apply depending on your location

Many artists find it helpful to transfer a percentage of each payment into a separate savings account designated for taxes.

Financial Software and Tools for Tattoo Artists​

The right tools can dramatically simplify your financial management.

Booking and Client Management

• Square Appointments
• Booksy
• Vagaro

These platforms often include payment processing, which creates automatic records of your income.

Accounting and Bookkeeping

• QuickBooks Self-Employed (designed for independent contractors)
• FreshBooks (user-friendly invoicing and expense tracking)
• Wave (free option for basic bookkeeping)

Expense Tracking

• Receipt scanning apps that let you photograph receipts on the go
• Mileage tracking apps if you travel for conventions or guest spots
• Dedicated business credit card to separate personal and business expenses

Planning for the Future​

Smart financial management isn't just about tracking current income and expenses—it's about building a sustainable future.

Emergency Fund Aim to save 3-6 months of operating expenses. Tattoo income can be seasonal or unpredictable, and having reserves helps you weather slow periods.

Retirement Savings Self-employed individuals can open a SEP-IRA or Solo 401(k) to save for retirement while reducing current tax liability. These accounts allow much higher contribution limits than traditional IRAs.

Equipment Replacement Tattoo equipment doesn't last forever. Set aside money regularly for replacing machines, updating your portfolio photography, or renovating your space.

Growth Investment Whether it's expanding your studio, bringing on another artist, or investing in advanced training, having funds available allows you to seize opportunities when they arise.

Common Financial Mistakes to Avoid​

Learn from these frequent pitfalls:

1. Mixing personal and business finances - Always maintain separate bank accounts and credit cards for business use.

2. Neglecting quarterly taxes - Waiting until April to pay taxes can result in penalties and a massive tax bill you're not prepared for.

3. Poor record-keeping - Missing receipts and disorganized records make tax time stressful and may cause you to miss deductions.

4. Underpricing services - Factor in all costs (supplies, rent, insurance, taxes) when setting rates, not just the time spent tattooing.

5. Ignoring cash flow - You might be profitable on paper but struggle if cash is tied up in inventory or unpaid deposits.

When to Hire Professional Help​

While many aspects of financial management can be handled independently, certain situations call for professional assistance:

• Hiring employees (payroll taxes are complex)
• Dealing with an IRS audit or tax problems
• Choosing a business structure
• Planning significant business expansion
• Earning over six figures (tax planning becomes more valuable)
• Selling your studio or business

A qualified bookkeeper or accountant familiar with small businesses (and ideally the tattoo industry) can save you money in the long run by maximizing deductions, avoiding penalties, and freeing up your time to focus on what you do best.

Conclusion​

Managing the financial side of your tattoo business doesn't have to be intimidating. With organized systems, consistent habits, and the right tools, you can maintain healthy finances while focusing on your artistic work. The key is to treat your financial management with the same professionalism and attention to detail that you bring to your tattoo artistry.

Remember: every hour you spend on solid financial practices is an investment in the long-term success and sustainability of your business. Start with the basics—separate accounts, organized records, and quarterly tax payments—and build from there. Your future self (and your accountant) will thank you.

Disclaimer: This article provides general information and should not be considered legal or tax advice. Tax laws and regulations vary by location and change frequently. Always consult with a qualified tax professional or accountant for advice specific to your situation.

Running a successful plumbing business requires more than just technical expertise and quality service. Sound financial management is the foundation that supports growth, profitability, and long-term sustainability. Whether you're a solo plumber or managing a team of technicians, understanding your finances can make the difference between thriving and merely surviving.

The Unique Financial Challenges Plumbers Face​

Plumbing businesses encounter specific financial complexities that differ from other industries. Understanding these challenges is the first step toward managing them effectively.

Tracking Variable Costs

Every job involves different materials, labor hours, and overhead. Unlike businesses with predictable inventory costs, plumbers must track expenses for diverse projects ranging from simple repairs to complex installations. Copper piping for one job might cost hundreds while another requires specialized fixtures costing thousands.

Seasonal Income Fluctuations

Many plumbing businesses experience significant seasonal variations. Winter often brings burst pipe emergencies and heating system repairs, while summer may see increased installation work. These fluctuations make cash flow planning essential for maintaining operations year-round.

Managing Subcontractors and Labor

Whether you're issuing 1099 forms to independent contractors or managing W-2 employees, payroll complexity increases with your team size. Each arrangement has different tax implications and record-keeping requirements that must be carefully managed.

Vehicle and Equipment Expenses

Your work truck isn't just transportation—it's a mobile office and warehouse. Properly tracking vehicle expenses, equipment depreciation, and tool purchases is crucial for accurate tax reporting and understanding your true job costs.

Essential Tax Deductions for Plumbers​

Understanding available tax deductions can significantly reduce your tax burden and improve your bottom line. Here are the key deductions plumbing businesses should track:

Tools and Equipment

Every wrench, pipe cutter, drain snake, and specialized tool you purchase for business use is potentially deductible. Keep detailed records of all equipment purchases, including date, cost, and business purpose.

Vehicle Expenses

If you use your vehicle for business purposes, you can deduct either actual expenses (gas, maintenance, repairs, insurance) or use the standard mileage rate. The IRS standard mileage rate for 2025 is 70 cents per mile for business use. Keep a detailed mileage log with dates, destinations, and business purposes.

Work Clothing and Safety Gear

Protective gear specific to plumbing work—steel-toed boots, work gloves, safety glasses, and specialized uniforms—can be deducted. However, regular clothing that could be worn outside of work doesn't qualify.

Business Insurance

Liability insurance, commercial vehicle insurance, and workers' compensation premiums are fully deductible business expenses that also protect your company from potential financial disasters.

Training and Certifications

Continuing education courses, licensing fees, certification renewals, and trade association memberships are all deductible investments in your professional development.

Advertising and Marketing

Website hosting, business cards, vehicle wraps, online advertising, and directory listings are essential marketing expenses that can be fully deducted.

Home Office Deduction

If you maintain a dedicated space in your home exclusively for business administration—handling invoices, scheduling, or bookkeeping—you may qualify for the home office deduction based on square footage.

Equipment Maintenance and Repairs

Costs to maintain, repair, and service your work vehicles and equipment are deductible. This includes everything from oil changes to camera equipment repairs.

Maintaining Comprehensive Financial Records​

Accurate record-keeping isn't just about tax compliance—it's about understanding the true health of your business. Here's what you should track:

Income Records

Document every payment received, whether cash, check, credit card, or electronic transfer. Include customer information, job details, payment method, and date. This creates an audit trail and helps identify your most profitable service areas.

Expense Documentation

Save receipts for all business purchases and categorize them properly. Digital receipt management apps can photograph and organize receipts automatically, reducing paper clutter and the risk of lost documentation.

Asset Tracking

Maintain a detailed list of equipment and vehicles, including purchase dates, costs, and depreciation schedules. This information is essential for insurance purposes and calculating depreciation deductions.

Payroll Records

If you have employees, keep comprehensive payroll records including wages, hours worked, taxes withheld, benefits paid, and any reimbursements. Retain these records for at least four years.

Inventory Management

Track plumbing supplies, parts, and materials. Knowing what you have on hand prevents over-ordering and helps identify shrinkage or theft. Many plumbers use inventory management software that integrates with their accounting system.

Job Costing Information

Track costs by job or customer to understand which services are most profitable. Include direct costs (materials and labor) and allocate appropriate overhead (vehicle expenses, insurance, administrative time).

Mastering Cash Flow Management​

Cash flow—not profit—is what keeps your business running day-to-day. You can be profitable on paper while struggling to pay bills if cash isn't managed properly.

Create a Cash Flow Forecast

Project your income and expenses at least three months ahead. Factor in seasonal variations, planned equipment purchases, and slow payment periods. This helps you anticipate shortfalls and plan accordingly.

Invoice Promptly and Follow Up

Send invoices immediately after completing work. The longer you wait, the longer you'll wait for payment. Implement a consistent follow-up system for overdue invoices—a polite reminder often prompts payment.

Offer Multiple Payment Options

Make it easy for customers to pay by accepting cash, checks, credit cards, and digital payments. While processing fees cut into margins slightly, they significantly increase the likelihood of immediate payment.

Build an Emergency Reserve

Aim to maintain 3-6 months of operating expenses in a reserve account. This buffer protects you during slow periods, enables you to handle unexpected equipment repairs, and provides peace of mind.

Manage Seasonal Fluctuations

During busy seasons, set aside extra profits to cover slower periods. Create a budget based on your lowest-earning months rather than your highest to avoid cash flow problems.

Consider a Line of Credit

A business line of credit provides flexible access to funds for emergencies or opportunities without the commitment of a term loan. Establish this relationship during strong financial periods, not when you desperately need it.

Separating Business and Personal Finances​

One of the most important financial practices for any plumbing business is maintaining clear separation between business and personal finances.

Open a Business Bank Account

Use a dedicated business checking account for all business transactions. This simplifies bookkeeping, provides clear documentation for tax purposes, and protects your personal assets through liability separation.

Get a Business Credit Card

A business credit card helps track expenses automatically and can provide valuable rewards on business purchases. Many offer cash back on gas and vehicle expenses—major categories for plumbers.

Pay Yourself a Reasonable Salary

Rather than pulling money out of the business randomly, establish a regular salary or draw schedule. This makes personal budgeting easier and simplifies tax planning.

Choosing the Right Business Structure​

Your business structure affects taxes, liability protection, and administrative requirements. Common options for plumbing businesses include:

Sole Proprietorship

The simplest structure with minimal paperwork, but offers no liability protection. All business income is reported on your personal tax return via Schedule C.

Limited Liability Company (LLC)

Provides liability protection while maintaining tax flexibility. Can be taxed as a sole proprietorship, partnership, S-corp, or C-corp depending on your situation.

S Corporation

Can reduce self-employment taxes for profitable businesses by splitting income between salary and distributions. Requires more administrative work and formal payroll processing.

Consult with a tax professional or attorney to determine the best structure for your specific situation, as this decision has long-term implications.

Pricing Your Services Profitably​

Understanding your costs is essential for profitable pricing. Many plumbers undercharge because they don't account for all their expenses.

Calculate Your True Hourly Cost

Add up all your annual expenses: vehicle costs, insurance, tools, supplies, marketing, administrative time, licenses, and any other overhead. Divide by your billable hours (typically 1,200-1,500 per year, accounting for non-billable time). This is your minimum hourly cost before profit.

Use Job Costing

Track actual costs for different types of jobs to identify which services are most profitable. You might find that drain cleaning generates better margins than installations, or vice versa.

Build in Profit Margin

After covering costs, add appropriate profit margin. Most successful plumbing businesses target 15-30% net profit margins depending on their market and service mix.

Review and Adjust Regularly

Costs change over time. Review your pricing at least annually and adjust as needed to maintain profitability.

Working with Financial Professionals​

While many aspects of financial management can be handled in-house, professional guidance often pays for itself many times over.

When to Hire a Bookkeeper

Consider professional bookkeeping help when:

• You're spending more than 5 hours per month on bookkeeping
• You're behind on recording transactions
• You're unsure about proper categorization
• Your business has grown beyond basic transactions

The Value of an Accountant

A qualified accountant provides:

• Tax planning strategies specific to your situation
• Guidance on business structure and entity selection
• Help with estimated tax payments to avoid penalties
• Preparation of accurate tax returns that maximize deductions
• Advice on major business decisions with tax implications

Finding the Right Professional

Look for professionals who work with trades businesses and understand the specific challenges of plumbing companies. Ask for referrals from other contractors and interview several candidates before choosing.

Leveraging Technology​

Modern software solutions can dramatically simplify financial management for plumbing businesses.

Accounting Software

Cloud-based platforms like QuickBooks Online, Xero, or FreshBooks connect to your bank accounts, categorize transactions, and generate financial reports automatically. Many integrate with other business tools.

Job Management Systems

Specialized software for service businesses combines scheduling, invoicing, customer management, and accounting in one platform. Popular options include ServiceTitan, Housecall Pro, and Jobber.

Receipt Scanning Apps

Apps like Expensify or Dext photograph receipts and extract key information automatically, eliminating the shoebox full of paper receipts.

Mileage Tracking

Automatic mileage trackers use your smartphone's GPS to log business trips, eliminating manual mileage logs and ensuring you capture every deductible mile.

Planning for Growth and Success​

Strong financial management isn't just about compliance and tax savings—it's about building a business that supports your goals.

Set Clear Financial Goals

Define specific revenue and profit targets. Break annual goals into quarterly and monthly targets to track progress and make timely adjustments.

Monitor Key Metrics

Track important indicators like average job value, customer acquisition cost, profit margin by service type, and cash conversion cycle. These metrics reveal trends and opportunities.

Invest in Your Business

When cash flow allows, invest in marketing, equipment, training, and systems that improve efficiency and service quality. Strategic investments drive future growth.

Plan for Retirement

Self-employed individuals can contribute significantly to tax-advantaged retirement accounts like SEP-IRAs or Solo 401(k)s. Start early and contribute consistently to build long-term wealth.

Conclusion​

Financial management might not be why you became a plumber, but it's essential for building a successful, sustainable business. By understanding your costs, maintaining accurate records, managing cash flow, and maximizing deductions, you create the foundation for growth and profitability.

Start with the basics—separate accounts, regular bookkeeping, and proper record-keeping. As your business grows, consider professional help and technology solutions to scale efficiently. Remember, every dollar saved through smart financial management is a dollar that stays in your pocket or gets reinvested in growing your business.

The plumbing industry offers tremendous opportunity for skilled professionals who combine technical expertise with sound business practices. By mastering your finances, you position yourself not just as a plumber, but as a successful business owner building lasting value.

Starting a Limited Liability Company (LLC) is one of the most popular choices for entrepreneurs and small business owners. At the heart of this process lies a critical document: the Articles of Organization. This comprehensive guide will walk you through everything you need to know about preparing, filing, and understanding this foundational business document.

Starting a business is exciting, but let's be honest—the administrative side can feel overwhelming. One of the most important early steps? Opening a business bank account. If you're wondering whether you really need one or what it takes to get started, you're in the right place.

Why Every Business Needs a Dedicated Bank Account​

Think about it: Would you use your friend's wallet to pay for your groceries? Probably not. The same logic applies to mixing business and personal finances. Here's why separating them matters:

Financial Clarity When tax season rolls around, you'll thank yourself for keeping clean records. No more scrolling through months of statements trying to figure out if that $47 charge was for coffee with a client or your weekend latte habit.

Legal Protection If you've formed an LLC or corporation, separating finances isn't just smart—it's legally required. This separation protects your personal assets if your business faces legal issues or debt. Even sole proprietors benefit from this protective barrier.

Professional Credibility Nothing says "amateur hour" quite like asking clients to make checks out to your personal name. A business account means professional checks, streamlined invoicing, and the credibility that comes with running a legitimate operation.

Access to Business Banking Perks Business accounts often unlock benefits you can't get with personal banking: lines of credit, business credit cards with rewards, merchant services for accepting payments, and purchase protection that keeps your customers' information secure.

Types of Business Bank Accounts Explained​

Not all business accounts are created equal. Here's what's available:

Business Checking Account This is your workhorse account. You'll use it for daily transactions—writing checks, making deposits, withdrawing cash, and using your business debit card. It's FDIC insured and works just like a personal checking account, but for business.

Business Savings Account Building an emergency fund or saving for a big purchase? A business savings account lets you stash cash while earning interest. Just note that many banks still limit these accounts to six withdrawals per month, and some charge fees.

Certificate of Deposit (CD) Account If you have money you won't need to touch for a while, a CD offers higher interest rates in exchange for locking your funds in for a set period. Early withdrawal? Expect to pay a penalty.

Merchant Account If you accept credit or debit card payments, you'll need a merchant account. This intermediary account processes payments before transferring funds to your main business account. They typically come with fees and multi-year contracts, so read the fine print.

What You'll Need to Open Your Account​

Gather these documents before heading to the bank:

Personal Identification

• Your Social Security number
• Two forms of government-issued ID (driver's license, state ID, or passport)

Business Documentation

• Employer Identification Number (EIN): You can apply online through the IRS. Sole proprietors may not legally need one, but getting an EIN adds a layer of identity fraud protection
• Business name documentation: This could be your DBA ("doing business as") certificate if you operate under a name other than your own
• Entity-specific paperwork: LLCs need their articles of organization, corporations need articles of incorporation, and partnerships need partnership agreements

Choosing the Right Bank: What to Consider​

Don't just go with the first bank you find. Take time to compare options:

Fee Structure Banking fees are tax-deductible, but you'd rather not pay them at all. Look beyond "no monthly fees" claims and check charges for cash deposits, wire transfers, debit card usage, and account maintenance.

Minimum Balance Requirements Brick-and-mortar banks often require minimum balances. If your account dips below the threshold, fees kick in. For businesses with fluctuating cash flow, seek out accounts with no minimum balance requirements.

Relationship Banking Benefits Planning to apply for a loan or line of credit down the road? Choosing a bank with lending services can streamline future financing. Some accounts even include preapproved credit lines when you open the account.

Interest Rates and Growth Potential If you're building business savings, interest rates matter. Compare rates across institutions to maximize your money's growth potential.

ATM Access and Convenience Need regular cash access? Make sure your bank has ATMs nearby—preferably fee-free ones. Some online banks partner with ATM networks to offer customers free access to thousands of locations.

Common Questions Answered​

Can I open a business account without an LLC? Absolutely. Business bank accounts are available for sole proprietorships, partnerships, S corps, C corps, and LLCs. You don't need to form an LLC first.

How much money do I need to open an account? It varies wildly—from as little as $25 to several hundred dollars. However, watch out for minimum daily balance requirements that might be higher than the opening deposit.

Do I really need an EIN? Sole proprietors and single-member LLCs can use their Social Security number, but getting an EIN is free, quick, and provides better identity protection. Plus, you'll need one if you plan to hire employees, operate as a partnership or corporation, or file certain tax returns.

Can sole proprietors use personal accounts for business? Legally, yes. Practically, it's a nightmare. Mixing finances makes tax preparation complicated, creates bookkeeping headaches, and looks unprofessional to clients and vendors.

The Bottom Line​

Opening a business bank account isn't just administrative busywork—it's a fundamental step in building a sustainable, professional business. Yes, it requires some paperwork upfront. Yes, you'll need to shop around for the right fit. But the clarity, protection, and credibility you gain are worth every minute spent setting it up properly.

Your business deserves its own financial identity. Give it one.

Ready to separate your business finances from your personal ones? Research local and online banks, gather your documents, and take that important step toward financial clarity. Your future self will thank you.

In today’s retail environment, accepting credit and debit cards is no longer optional—it’s practically required. But behind every swipe, tap, or online purchase lies a network of systems and accounts working tirelessly behind the scenes. A key piece of that puzzle is something called a merchant account.

If you’re a small business owner or entrepreneur, here’s a practical guide to understanding what merchant accounts are, how they work, and whether they’re right for your business.

1. What Is a Merchant Account?​

A merchant account is a specialized financial account that acts as an intermediary between your customer’s credit/debit card and your business bank account. Think of it as a secure holding area for funds.

When a customer pays with a card, the money doesn't go directly into your checking account. Instead, it temporarily holds the funds from the transaction while all the necessary approval and verification checks happen. Once the transaction is confirmed, the money is “settled” and transferred (minus any processing fees) into your actual business bank account. Unlike a typical bank account where you can withdraw or deposit freely, a merchant account is a one-way street, designed exclusively to receive and process card transaction flows.

In essence, it’s where the money “parks” during the crucial authorization and verification process.

2. How Does the Merchant Account Process Work?​

It might seem instantaneous to the customer, but a lot happens in the few seconds after a card is used. Let’s walk through a simplified transaction:

1. A customer swipes or taps their card at your store or enters their card information on your website.
2. The transaction data is securely sent to a payment processor, which then forwards it to the acquiring bank that provides your merchant account.
3. The acquiring bank sends the request to the relevant card network (like Visa, Mastercard, or American Express).
4. The card network passes the request to the issuing bank (the customer’s bank) to check for available funds, verify the card's validity, and run fraud checks.
5. If everything checks out, an approval signal is sent back through the entire chain to your merchant account.
6. After a short delay, typically one to two business days, your merchant account transfers the approved funds (after deducting fees) directly to your business bank account.

This entire flow enables you to receive money well before the customer actually pays their credit card bill, as long as all the necessary verifications clear.

3. Why Your Business Needs a Merchant Account​

If you’re still only accepting cash or checks, you might be missing out on significant opportunities. Here are the key benefits of being able to process card payments:

• Customer Convenience: In an increasingly cashless society, many people carry very little cash and expect to pay by card. Not offering this option can be a deal-breaker.
• Increased Sales: Studies have shown that shoppers often spend more when using a credit card compared to cash. Accepting cards can lead to higher average transaction values.
• Professionalism & Credibility: The ability to accept major credit cards gives your business legitimacy and builds trust, which can encourage repeat business.
• Faster Access to Funds: Instead of waiting for a check to clear or a customer to pay off their card, the settlement process moves funds rapidly into your account.

Simply put, you risk turning away valuable customers who just don’t carry enough cash to make a purchase at your store.

4. What to Consider When Setting Up a Merchant Account​

Not all merchant accounts are created equal. As you evaluate your options, here are the main factors to weigh:

• Which Cards You’ll Accept: Will you take Visa, Mastercard, American Express, and Discover? The more card types you accept, the broader your potential customer base.
• Fee Structure: This is crucial. Typical costs can include setup or application fees, monthly maintenance fees, per-transaction fees (often a percentage plus a flat rate), and fees for equipment like terminals or systems.
• Type of Payment Systems: Consider how you’ll take payments. Will you use a traditional in-store terminal, a mobile swiper for on-the-go sales, a full point-of-sale (POS) setup, or online e-commerce payment gateways?
• Your Industry Risk Level: Providers classify industries based on their perceived risk of fraud or chargebacks. Businesses in sectors like travel, supplements, or adult services are often considered “high risk” and may face higher fees or be declined by some providers.
• Security & Compliance: You are responsible for protecting your customers' card information. This means you’ll need to follow the Payment Card Industry Data Security Standards (PCI DSS), a set of rules designed to prevent data breaches.
• Customer Support & Flexibility: What happens when you need help resolving a held payment, a chargeback, or a technical dispute? Having reliable and accessible customer support can be a huge lifesaver.

5. Requirements for Getting a Merchant Account​

Because a merchant account provider takes on financial risk (from potential fraud and chargebacks), they will conduct a thorough underwriting process. You may be asked to provide:

• A valid business bank account with routing and account numbers.
• Financial statements, often for the last one to two years.
• Tax returns or personal banking history, especially if your business is new.
• Your business license or registration documents.
• A clear description of your products, services, and policies (e.g., shipping and returns).
• Evidence that your business meets PCI compliance standards.

Having this documentation prepared in advance will help speed up the application and onboarding process significantly.

6. Payment Service Providers (PSPs): An Alternative Option​

If the idea of managing a standalone merchant account feels too complex or costly, many small businesses turn to a payment service provider (PSP). You’re likely already familiar with the big names: Stripe, PayPal, and Square are all examples of PSPs. Here’s how they differ from a traditional merchant account.

Advantages of PSPs:

• All-in-One Solution: A PSP bundles everything you need—the payment processing, security, and settlement—into one service.
• Simplified Pricing: Instead of a complex web of different fees, you often pay a straightforward, flat per-transaction rate.
• Fast Setup: You can typically get started almost immediately, without the lengthy vetting process of a dedicated merchant account.
• Ease for E-commerce: Many PSPs are built from the ground up for online stores and mobile payments, with easy integrations.

Trade-offs:

• Less Control: Your funds and account settings are managed under the PSP’s master account, giving you less direct control.
• Higher Per-Transaction Costs (Sometimes): The simple flat rate can be more expensive than a dedicated merchant account, especially for businesses with high sales volumes.
• Less Personalized Customer Support: Since PSPs serve millions of clients, resolving holds or other issues can sometimes be slower and more automated.
• Account Risk: Because you are part of a shared system, providers can be stricter about account suspensions or terminations if they detect activity that violates their terms of service.

7. Which Approach Is Best for Your Business?​

So, should you get a dedicated merchant account or go with a PSP? Here’s a quick guide to help you decide.

For businesses with low transaction volumes, PSPs often make the most economic sense. However, as your sales grow, a dedicated merchant account could offer better margins, more flexibility, and stronger control over your payment processing.

8. What to Watch Out for (Risks & Challenges)​

Whichever path you choose, be aware of potential pitfalls:

• Hidden Fees or Fine Print: Read every contract carefully. Some providers hide extra charges or clauses that can be costly down the line.
• Chargebacks: When a customer disputes a charge, the funds can be held or reversed. You may also face additional penalty fees for each chargeback.
• Account Holds or Freezes: Providers may temporarily suspend your processing if they detect suspicious activity, which can disrupt your cash flow.
• Security & Compliance Risks: Failing to meet PCI requirements can lead to steep penalties and severe damage to your business’s reputation.
• Lock-in or Long-Term Contracts: Beware of agreements that require you to stay with a provider for long periods, as this can limit your ability to switch if you find a better option.

9. Tips for a Smooth Setup​

• Shop Around: Get proposals from several providers and compare their fee structures, contract terms, and features.
• Negotiate: Don’t be afraid to negotiate. Some fees can be reduced, especially if you have a solid sales history or growing volume.
• Use a Trusted Payment Processor: Your payment gateway is just as important as your merchant account. Choose a reliable partner.
• Stay Compliant: Make PCI DSS compliance a priority. Enforce strong security practices and monitor your chargeback ratios closely.
• Monitor Performance: Regularly review your processing statements to understand your effective rate, settlement times, and overall support quality.
• Plan for Growth: Choose a provider that can scale with you. What works for your business today may not be the right fit in two years.

10. Final Thoughts​

Accepting card payments is essential in today’s marketplace, but the infrastructure behind it requires careful consideration. A merchant account is one of the foundational building blocks that allows your small business to securely, reliably, and rapidly receive payments from your customers.

For many startups and small retailers, using a payment service provider is a convenient and effective launch pad. But as your business scales, taking the time to evaluate a dedicated merchant account could unlock lower costs, greater control, and better overall flexibility.

If you’re evaluating your options, the best move is to do your research. Request quotes from multiple providers, understand all the associated fees, compare features, and ultimately choose the solution that best aligns with your transaction volume, growth plans, and risk profile.

Choosing a business bank account shouldn’t feel like a part‑time job. Below is a practical, up‑to‑date guide that cuts through marketing fluff and shows you what to look for—then matches common business needs to solid options. I’ll also flag a few rules and gotchas so you can open your account with confidence.

TL;DR​

• Match the account to your workflow. Heavily digital? Prioritize real‑time transfers, sub‑accounts, and software integrations. Handle cash often? Favor branch access or large cash‑deposit networks.
• Mind the fees and limits. Look closely at monthly fees (and waiver rules), transaction caps, cash‑deposit fees, and wire/ACH costs.
• Protect your balance. Standard FDIC insurance is $250,000 per depositor, per insured bank, per ownership category—use sweep programs or multiple institutions if you regularly hold more.

Step 1: Make a 2‑minute “needs list”​

Ask yourself:

1. Cash handling: Do you deposit on a weekly basis? You’ll want branch coverage or a wide cash‑deposit network (e.g., Allpoint+ or Green Dot).
2. Payments: How often do you send ACH, wires, or international payments? Do you need same‑day ACH or support for instant payment rails (RTP® or FedNow®)?
3. Team and controls: Will you issue multiple cards, set spending limits, or create sub‑accounts/envelopes to run “Profit First” style budgeting?
4. Tools: Which platforms must connect (QuickBooks, Xero, Stripe, Shopify, payroll)?
5. Balance safety: If you keep >$250k on deposit, consider accounts that use sweep networks or ICS® to expand FDIC coverage.

Step 2: Shortlist by use‑case (top options that actually fit)​

Note: Features and APYs can change—always confirm details on the provider’s site when you apply.

If you want high‑yield checking with easy ACH​

• Bluevine — No monthly fee on Standard; 1.3% APY on qualifying balances (higher APYs on Plus/Premier), free standard ACH, and large cash‑deposit access via Allpoint+ ATMs and Green Dot. FDIC insurance can reach **up to $3M** via program banks. (Outgoing domestic wires ~$15; no international wires.)

If you need lots of sub‑accounts, roles, and spend controls​

• Relay — Create up to 20 checking accounts and issue up to 50 debit cards with spend limits; deposit cash at Allpoint+ (often free) or 90k+ Green Dot locations (retailer fee up to $4.95). Paid tiers add same‑day ACH and free outgoing wires; savings APY varies by plan.

If you’re a startup or send global payments​

• Mercury — $0 monthly fee; **free ACH**, **free domestic and USD international wires**; **1$5M** via partner banks. Robust user roles, virtual cards, and accounting integrations.

If you handle some cash but want a modern, low‑maintenance account​

• U.S. Bank Business Essentials® — $0 monthly maintenance fee, unlimited digital transactions, and 25 free teller/paper transactions per statement cycle. Handy if you occasionally need a branch.

If you want big‑bank branch access and built‑in card acceptance​

• Chase Business Complete Banking® — $15 monthly fee with multiple ways to waive; Chase QuickAccept lets you take cards in the app and get same‑day funding. Check the transaction allowances and non‑Chase ATM fees if you’re high‑volume.

If you prefer an online bank with wire perks​

• Axos Basic Business Checking — No monthly fees, free domestic & international incoming wires, two domestic outgoing wire reimbursements monthly, and unlimited domestic ATM fee reimbursements. No minimum opening deposit.

If you’re mostly online and don’t handle cash​

• Novo — Clean integrations (Stripe, Square, etc.), budgeting “Reserves,” and ATM fee refunds—but no direct cash deposits (you’ll use money orders if you must deposit cash).

If you’re a solo operator/freelancer who wants built‑in bookkeeping & tax tools​

• Found — $0 monthly fee; banking bundled with invoicing, expense tracking, and real‑time tax estimates—great for sole props. Check transfer/cash limits if you scale.
• Lili — Freelancer‑friendly features (expense categories, tax tools) with tiered plans; consider paid tiers for advanced features.

Step 3: Run this 10‑minute selection checklist​

1. Map fees to your usage. Add up: monthly fee (and realistic waiver), wire costs, same‑day ACH fees, and cash‑deposit charges. For example, some networks cap retailer cash‑deposit fees up to $4.95; certain ATMs may be free.
2. Check transaction caps. Many “free” accounts cap in‑branch or paper transactions and charge per item afterward; digital transactions are often unlimited.
3. Look for instant payment rails. If you need immediate settlement, ask whether the provider supports RTP® or FedNow® (availability varies by bank).
4. Confirm integrations. Ensure your account syncs with your accounting stack and payment processors (QuickBooks, Xero, Stripe, Shopify, payroll).
5. Plan for balances >$250k. Either spread funds across banks or use sweep/ICS programs for expanded FDIC coverage.

What matters most (and how to evaluate it)​

• Fees & waivers: Monthly fees and waiver rules (e.g., balance minimums, debit spend) differ widely—for instance, some big‑bank small‑business accounts waive fees with specific balances or card spend each cycle.
• Payments: Compare standard ACH (often free) vs same‑day ACH (typically a flat fee), domestic/intl wire pricing, and FX margins.
• Cash: If you’re cash‑heavy, check branch coverage and ATM/retail cash‑deposit networks (Allpoint+ and Green Dot are common) and their fees/limits.
• User roles & controls: Multi‑user permissioning, virtual/physical cards, spend limits, and sub‑accounts reduce reconciliation headaches.
• FDIC coverage: Standard coverage is $250k per depositor, per insured bank, per ownership category; sweep/ICS programs help extend coverage across multiple banks.

Document checklist for opening your account​

Banks need to verify you and your business. Expect to bring:

• Personal ID (government‑issued).
• Business formation documents (Articles of Organization/Incorporation, etc.).
• EIN (or SSN for certain sole proprietors); many LLCs will be asked for an EIN.
• Operating agreement (LLCs) or bylaws (corporations).

Heads‑up on beneficial ownership: Regardless of separate federal reporting rules, banks still must collect beneficial owner information (generally any 25% owners and one control person) under the FinCEN Customer Due Diligence (CDD) Rule when you open an account. Be prepared to provide names, DOBs, addresses, and IDs for those individuals.

About BOI reporting to FinCEN: The separate federal beneficial ownership reporting requirement has been in flux in 2025; an interim final rule issued March 26, 2025, exempted most domestic companies while rulemaking proceeds (foreign reporting companies remained in scope). Check FinCEN’s site for the latest before you file.

Quick “good‑fit” matches (by scenario)​

• Profit First budgeting or multi‑brand ops: Relay (20 accounts, role‑based controls, same‑day ACH on paid tiers).
• High‑APY checking & simple domestic payments: Bluevine (1.3%–3.5% APY plans; free standard ACH; cash deposits via Allpoint+/Green Dot).
• Global transfers & large balances: Mercury (free USD wires, 1% FX on non‑USD, sweep up to $5M).
• Occasional cash deposits + zero monthly fee: U.S. Bank Business Essentials (unlimited digital, 25 free in‑branch/paper per cycle).
• Branch network + in‑app card acceptance: Chase Business Complete (QuickAccept, multiple fee‑waiver paths).
• Wire‑friendly online bank: Axos Basic Business Checking (free incoming wires, ATM fee reimbursements).
• Freelancers/sole props wanting built‑in tax: Found or Lili.
• Online‑only, no cash: Novo (great integrations; no direct cash deposits).

Pro tips before you click “Apply”​

1. Simulate your monthly activity. Price out your typical month—ACH volume, wires, card spend, cash deposits—to see which account is truly cheapest. (Fee pages and “clarity statements” matter.)
2. Ask about instant rails. If your payables/receivables need speed, confirm RTP®/FedNow® support with the bank (and whether it’s for receive, send, or both).
3. Verify FDIC details. If a fintech is “not a bank,” look for the member banks behind it and how sweep coverage works.
4. Keep cash options handy. Even digital businesses need occasional cash deposits—know your nearest Allpoint+ or Green Dot locations and the fee/limits.

FAQ​

Do I need an EIN to open a business bank account? Sole proprietors sometimes open with an SSN, but LLCs are often asked for an EIN, and having one broadens your account choices. It’s free and fast to apply with the IRS.

Are online platforms safe? Look for accounts where deposits sit at FDIC‑insured partner banks and, when needed, are spread via sweep networks (or ICS) to increase insured coverage.

Which accounts are “free”? “Free” usually refers to monthly maintenance; you may still pay for wires, same‑day ACH, or cash deposits. Compare the schedule of fees and your actual usage.

Final word​

There’s no one “best” business bank account—just the best fit for your mix of cash handling, transfers, team needs, and balances. Use the shortlist above as a starting point, and always verify current APYs, fees, and limits on the provider’s site when you apply. If you want, tell me your transaction mix, average balances, and must‑have integrations—I’ll recommend a tight top‑three tailored to you.

Starting a business with a partner can be an exciting venture, but choosing the right business structure is crucial for your success. One of the simplest and most common structures for multi-owner businesses is the general partnership. This guide will walk you through everything you need to know about general partnerships, helping you decide if this business structure is right for you.

What Is a General Partnership?​

A general partnership is a business arrangement where two or more individuals agree to share ownership, responsibilities, and profits of a business. Unlike more complex business structures, general partnerships are straightforward: each partner typically has equal say in business decisions and shares equally in both the profits and the liabilities of the business.

The beauty of a general partnership lies in its simplicity. You might already be in one without realizing it. If you and a friend started offering freelance services together, or if you and a colleague launched a consulting practice, you've likely formed a general partnership by default, even without formal paperwork.

Understanding Partnership Liability​

Before diving into a general partnership, it's essential to understand the concept of liability. In legal terms, liability refers to the financial and legal responsibility each partner has for the business's debts and obligations.

In a general partnership, liability is shared among all partners. This means if your partner makes a poor business decision that results in debt, you're personally responsible for that debt too. Your personal assets, including your home, car, and savings, could be at risk if the business faces financial troubles or legal action.

This shared liability is perhaps the most critical factor to consider when evaluating whether a general partnership is right for you.

How to Establish a General Partnership​

The Basics​

Technically, forming a general partnership is remarkably simple. In most jurisdictions, you can create a partnership through nothing more than a verbal agreement between partners. Two people agreeing to go into business together can constitute a partnership without filing any paperwork with the state.

However, simple doesn't always mean smart.

The Importance of a Partnership Agreement​

While a handshake agreement might seem sufficient when you're partnering with a trusted friend or family member, it's a recipe for potential disaster. Even the strongest relationships can face strain when money and business decisions are involved.

A written partnership agreement is your safeguard. Think of it as a roadmap for your business relationship that clarifies expectations and provides a framework for resolving disputes.

What Should a Partnership Agreement Include?​

At minimum, your partnership agreement should address:

Essential Elements:

• The official name of your partnership
• How profits and losses will be divided among partners
• The contribution each partner will make (money, time, expertise, or resources)
• Procedures for admitting new partners or removing existing ones
• What happens when a partner wants to exit the business

Additional Provisions:

• The specific nature and scope of your business activities
• The duration of the partnership (if it's not intended to be indefinite)
• Decision-making processes and voting rights
• Rules for resolving disagreements between partners
• Procedures for dissolving the partnership if necessary
• Management responsibilities and authority of each partner
• Rules about taking on additional debt or making major purchases

Getting Legal Help​

While templates are available online, it's wise to have an attorney review or draft your partnership agreement. A lawyer familiar with business law can help you anticipate potential issues and ensure your agreement complies with state laws. This investment upfront can save you thousands in legal fees later if disputes arise.

How General Partnerships Differ from Other Business Structures​

Understanding how general partnerships compare to other business entities can help you make an informed decision.

Limited Partnerships​

A limited partnership includes at least one general partner who manages the business and assumes full liability, plus one or more limited partners. Limited partners invest money in the business but don't participate in day-to-day management. Their liability is restricted to the amount they've invested. If you invest $5,000 as a limited partner and the business fails, creditors can only pursue that$5,000, not your other personal assets.

Limited Liability Partnerships (LLPs)​

Limited liability partnerships offer partners protection from personal liability for the negligent actions of other partners. This structure is particularly popular among professional service firms like law practices, accounting firms, and medical groups. While you're still liable for your own actions and the business's contractual obligations, you're protected from liability arising from another partner's malpractice or negligence.

Corporations​

Corporations provide the strongest liability protection. In a corporation, the business is a separate legal entity from its owners (shareholders). If the corporation faces debts or lawsuits, the owners' personal assets are generally protected. However, corporations are more complex and expensive to form and maintain, requiring more paperwork, formalities, and often higher taxes.

Advantages of Forming a General Partnership​

Simplicity and Low Cost​

General partnerships are incredibly easy to establish. There's no need to file articles of incorporation, pay formation fees to the state, or comply with complex regulatory requirements. You can start operating immediately once you and your partner(s) agree to work together.

Tax Benefits​

General partnerships enjoy "pass-through taxation." The partnership itself doesn't pay income taxes. Instead, profits and losses pass through to the individual partners, who report them on their personal tax returns. This avoids the double taxation that corporations face, where the business pays corporate tax on profits, and then shareholders pay personal tax on dividends.

Pass-through taxation can also be advantageous if your business has losses in its early years, as you can use those losses to offset other personal income on your tax return.

Flexibility​

General partnerships offer significant flexibility in how you structure your business arrangements. Want to split profits 60-40 instead of 50-50? No problem. Want to give one partner more decision-making authority in exchange for less financial contribution? You can negotiate that. As long as all partners agree, you can customize your arrangement to fit your specific situation.

Pooled Resources and Expertise​

Partnerships allow you to combine financial resources, skills, and networks. One partner might contribute capital while another brings industry expertise. This pooling of resources can help your business grow faster than if you went it alone.

Disadvantages and Risks of General Partnerships​

Unlimited Personal Liability​

This is the biggest drawback. As a general partner, you're personally liable for all business debts and obligations, including those created by your partners. If your partner signs a lease, takes out a loan, or makes a poor business decision that results in debt, you're equally responsible. Creditors can come after your personal assets to satisfy business debts.

Joint and Several Liability​

Not only are you liable for business debts, but you can also be held responsible for your partner's negligent actions or wrongful acts committed in the course of business. If your partner causes an accident during a business delivery, gets sued for malpractice, or commits fraud, you could be held liable even if you had no involvement.

Potential for Conflict​

Disagreements between partners are common, especially under the stress of running a business. Conflicts about business direction, financial management, work ethic, or personal issues can threaten the partnership. Without a solid partnership agreement and good communication, these disputes can destroy the business.

Shared Profits​

Every partner has a claim to the profits. Even if you feel you're doing more work than your partner, you'll need to split profits according to your partnership agreement. This can lead to resentment if partners don't contribute equally.

Difficulty Raising Capital​

Investors and lenders may be hesitant to invest in or lend to general partnerships because of the unlimited liability issue. Banks might require personal guarantees, and outside investors often prefer the clearer structure and liability protection of corporations or LLCs.

Is a General Partnership Right for You?​

A general partnership might be the right choice if:

• You're starting a low-risk business with one or more trusted partners
• You want to test a business idea without significant upfront costs
• You need flexibility in how you structure ownership and profit-sharing
• You're comfortable with shared liability
• You want to keep administrative requirements to a minimum

However, you should consider other business structures if:

• Your business involves significant liability risks
• You want to protect your personal assets from business debts
• You're partnering with people you don't know extremely well
• You plan to seek outside investment or loans
• You want your business to continue indefinitely regardless of changes in ownership

Protecting Yourself in a General Partnership​

If you decide a general partnership is right for you, take these steps to protect yourself:

Get Everything in Writing: Never rely on verbal agreements. A comprehensive partnership agreement is essential.

Consider Insurance: General liability insurance, professional liability insurance, and other business insurance policies can provide some protection against common risks.

Keep Business and Personal Finances Separate: Open a business bank account and keep meticulous records. This separation can help protect personal assets in some situations.

Stay Involved: Even if one partner handles day-to-day operations, stay informed about all major business decisions, contracts, and financial obligations.

Communicate Regularly: Hold regular partner meetings to discuss business performance, challenges, and strategic direction. Address conflicts early before they become major problems.

Plan for Exit Scenarios: Your partnership agreement should include clear procedures for what happens when a partner wants out, becomes incapacitated, or dies.

Moving Forward​

A general partnership can be an excellent way to start a business with partners, offering simplicity, tax advantages, and flexibility. However, the unlimited personal liability and potential for conflict mean it's not the right choice for everyone.

Take time to carefully evaluate your business concept, your partners, and your risk tolerance. Consult with an attorney and accountant who can provide personalized advice based on your specific situation. Whether you proceed with a general partnership or choose a different structure, making an informed decision now will set your business up for success in the future.

Remember, you're not locked into a general partnership forever. As your business grows and evolves, you can always transition to a different business structure that better serves your needs.

Every entrepreneur asks the same question when starting out: "When will my business finally make money?" It's a valid concern—after all, you're investing time, energy, and capital into your venture, and you need to know when you'll see a return.

The simple answer? Most small businesses take between 2-3 years to become profitable.

But if you're looking for something more nuanced (and let's be honest, more useful), the reality is far more complex. Your path to profitability depends on your industry, business model, initial investment, and how efficiently you manage your resources.

Let's dive into what really determines when your business will start making money—and more importantly, what you can do to speed up the process.

Why Some Businesses Profit Faster Than Others​

Not all businesses are created equal when it comes to profitability timelines. The difference often comes down to one critical factor: overhead costs.

Low-overhead businesses like consulting, coaching, freelance writing, or web development can become profitable within months. Why? Because these businesses typically require:

• Minimal equipment or inventory
• No physical storefront or warehouse
• Few (if any) employees initially
• Low monthly operating costs

A freelance consultant working from home might only need a laptop, reliable internet, and some basic software subscriptions. Once they land their first few clients, they're essentially profitable.

High-overhead businesses like restaurants, manufacturing companies, retail stores, or tech startups face a much longer runway. These businesses need:

• Significant upfront capital investment
• Physical locations with rent and utilities
• Inventory or raw materials
• Multiple employees
• Equipment and machinery
• Marketing budgets to reach customers in competitive markets

A restaurant owner might spend $250,000-$500,000 before opening day, then need months or years of consistent sales to recoup those costs while covering ongoing expenses like payroll, food costs, and rent.

Understanding Your Break-Even Point​

Before you can talk about profitability, you need to understand when you'll break even—the point where your revenue exactly covers your expenses.

Here's a straightforward formula to calculate your break-even point:

Break-Even Point = Fixed Costs ÷ (Price Per Unit - Variable Cost Per Unit)

Let's walk through a real example. Imagine you're launching a boutique candle business:

• Fixed costs: $3,000/month (rent for a small studio, insurance, your salary)
• Variable cost per candle: $8 (wax, wicks, jars, labels)
• Selling price per candle: $28

Your break-even calculation: $3,000 ÷ ($28 - $8) = 150 candles per month

You need to sell 150 candles every month just to break even. Every candle sold beyond that represents pure profit.

This calculation becomes your North Star. It tells you exactly what sales volume you need to hit before your business starts generating actual income.

Five Strategies to Reach Profitability Faster​

Waiting years to see profits isn't ideal, especially when bills keep coming. Here are five proven strategies to accelerate your path to profitability:

1. Ruthlessly Cut Unnecessary Expenses​

The fastest way to profitability isn't always increasing revenue—sometimes it's decreasing costs. Audit every single business expense and ask: "Is this essential right now?"

Consider these cost-cutting moves:

• Go remote: Eliminate office rent by working from home or using co-working spaces only when needed
• Buy used: Purchase refurbished equipment, gently used furniture, or certified pre-owned vehicles
• Negotiate everything: From software subscriptions to supplier contracts, most prices are negotiable
• Start lean: Resist the urge to hire too quickly. Use contractors or part-time help before committing to full-time salaries

One entrepreneur I know delayed hiring for six months by outsourcing specific tasks to freelancers. This saved him $60,000 in salary and benefits while his business found its footing.

2. Master the Three Revenue Growth Levers​

On the flip side, you can reach profitability by growing revenue faster than expenses. There are three primary ways to boost your top line:

Increase sales volume: Focus on customer acquisition and retention. Build a consistent marketing engine through content marketing, social media, partnerships, or paid advertising. For existing customers, create loyalty programs or subscription models that encourage repeat purchases.

Raise your prices: This is often the most underutilized strategy. A 10% price increase often has a bigger impact on profitability than a 10% reduction in costs. If you're providing genuine value, many customers will pay more—especially if you can articulate the benefits clearly. Service providers should regularly reassess their rates as they gain experience and expertise.

Improve customer lifetime value: It's cheaper to keep existing customers than find new ones. Focus on delivering exceptional experiences, asking for feedback, and continuously improving your product or service. The longer customers stay with you, the more profitable your business becomes.

3. Track Your Numbers Religiously​

You can't improve what you don't measure. Many business owners operate on gut feeling rather than data, which is a recipe for prolonged unprofitability.

Implement these essential tracking habits:

• Weekly revenue reviews: Know exactly how much money is coming in
• Monthly expense audits: Identify spending patterns and eliminate waste
• Profit margin analysis: Understand which products or services are actually profitable
• Cash flow forecasting: Anticipate dry spells before they become crises

Set up a simple spreadsheet or use accounting software to monitor your key metrics. Spend 30 minutes each week reviewing your numbers. This habit alone can shave months off your timeline to profitability.

4. Delegate What Drains You​

As a founder, your time is your most valuable asset. Every hour spent on tasks outside your core competency is an hour not spent growing your business.

Calculate your effective hourly rate (your desired annual income divided by 2,000 working hours). If a task can be outsourced for less than your hourly rate, you should seriously consider hiring help.

Common tasks worth outsourcing:

• Bookkeeping and accounting
• Website maintenance
• Social media management
• Customer service
• Administrative work
• Content creation

Yes, outsourcing costs money upfront. But if it frees you up to land new clients, develop better products, or implement profit-driving strategies, it pays for itself quickly.

5. Stay Flexible and Ready to Pivot​

Some of the most successful businesses today started as something completely different. Twitter began as a podcasting platform. YouTube was originally a video dating site. Instagram started as a location check-in app.

If your current approach isn't working after 6-12 months of genuine effort, don't be afraid to pivot. Look for opportunities to:

• Target a different customer segment
• Adjust your product or service offering
• Change your pricing model
• Explore adjacent markets

The key is staying observant. Pay attention to unexpected successes, customer requests for features you don't offer, or adjacent problems you could solve. Sometimes profitability is hiding in plain sight—you just need to be open to seeing it.

The Bottom Line​

While the average timeline to profitability sits around 2-3 years, that number represents an average of wildly different businesses. Your specific timeline depends on your business model, industry, and most importantly, the decisions you make along the way.

Focus on understanding your break-even point, reducing unnecessary costs, growing revenue strategically, and staying flexible enough to pivot when needed. With disciplined financial management and a willingness to adapt, you can beat the averages and reach profitability faster than you think.

Remember: profitability isn't just about working harder—it's about working smarter, measuring what matters, and making data-driven decisions that move your business forward. Start implementing these strategies today, and you'll be asking "How can I stay profitable?" instead of "When will I become profitable?" sooner than you expect.