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Quickbooks Self-Employed vs. Quickbooks Online: Which One Is Right For Your Business?

"Oh, you're starting a business? You have to get Quickbooks!" Okay, but... which version?!

Whether you're just starting your business or finally leveling-up your business's financial systems, investing in an accounting software is a must. Quickbooks is, of course, my go-to. But with so many versions available, how do you know which is right for your business?

I've got you. Here's how to choose between Quickbooks Self-Employed and Quickbooks Online.

Is it a hobby or a business?

Before you invest in either Quickbooks Self-Employed or Quickbooks Online, you have to get real with yourself about the status of your business.

A business is meant to make a profit, meaning you'll bring in more money than you spend keeping your business up and running. In a true business, your revenue is greater than your expenses.

A hobby, even one that makes money, does not make a profit. Instead, it (hopefully) makes just enough to pay for upkeep. For example, if you sold handmade goods, your total revenue would be equal or less than your expenses (like materials and packaging). Your revenue would never exceed your expenses.

Of course, there's nothing wrong with having a hobby instead of a business! It's a great way to fund an activity you love without dipping too much into your personal finances.

Once you determine whether you have a hobby or a business, you can make an educated decision about your accounting software.

Choosing Quickbooks Self-Employed vs. Quickbooks Online

The decision between Quickbooks Self-Employed and Quickbooks Online really comes down to how you manage your business finances.

If you use your personal bank account for everything...

... get Quickbooks Self-Employed. Most often, this is for...

  • Independent contractors without dedicated business accounts

  • People with hobbies that they'll be deducting from their taxes

You might still deduct expenses like materials and packaging from your taxes, but you're not making enough that you need a business bank account to "pay yourself" from.

The greatest benefit of Quickbooks Self-Employed is that you can categorize every transaction as 'business' or 'personal.' If you're using the same debit card to buy groceries and your hobby supplies, you can easily separate those purchases within the software. When it's time to file your taxes, Quickbooks will automatically calculate how much you can deduct as a business expense.

If you have a separate business bank account...

... get Quickbooks Online. This software is built for full-blown businesses with dedicated accounts. There's no separating business and personal expenses.

Some more benefits of Quickbooks Online include the abilities to...

  • Grant limited access to your accountants

  • Create 1099's for your contractors

  • Manage multiple currencies for overseas clients

  • Track billable hours

  • Integrate with third-party apps

If you have a business bank account and intend to turn a profit in your business (even if you're not yet), go ahead and invest in Quickbooks Online. It will make your life (and your accountant's!) so much easier.

When to Open a Business Bank Account

If you're just starting out or transitioning your hobby into a profitable business, you might be unsure whether or not you should open a business bank account. A few things to consider...

  • Are you making a profit? If so, it's always better to open a business banking account to keep all transactions separate. All business revenue comes into your business account, and then you 'pay yourself' from there.

  • How are you paying your taxes? Keeping business and personal transactions separate will make paying your taxes so much easier. And if you're investing in an accountant, they'll probably recommend you open a business account.

  • Do you want to hire employees or a subcontractor? If so, go ahead and separate your finances now. And if you go ahead and invest in Quickbooks Online, you can create 1099's for those contractors directly from the software. Bonus!

When in doubt, I always recommend opening that business bank account. Even if you don't plan to make a profit right away, you never know what the future holds for your business!

Want support DIYing your business finances?

Just getting started with your business finances? Or maybe you're just tired of 'winging it?' Come join us in The Cash Club, a membership for entrepreneurs, side-hustlers, and hobbyists who want to DIY their finances without the guesswork.


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