We originally intended to wait until March to start shopping for a business credit card. However, after doing some bookkeeping, the need to have a dedicated business credit card became more pronounced. Therefore, we acquired a Capital One Spark Classic business credit card earlier today. We will go over why we need a business credit card and why this particular card.
Why Make Hive Content Creation a Business?
Many people complain that the rich don't pay taxes. It is a foolish complaint. All of us have the opportunity to reduce or eliminate our tax burden, if we know the rules and play by them. A simple search for "home business tax deductions" on Amazon will give you a list of publications that teach you how to operate your business so that you are able to reduce your taxes.
This works great if you have a business in which you are earning in fiat. You can deduct office supplies, part of your home utilities, payroll for hiring your children, your business phone service, web hosting, business travel, mileage, and so many other items. All of these are costs to you in the attempt to make a profit. These costs reduce your overall profit. Thus, you only pay taxes on the remainder of your income after you have deducted your expenses.
Obviously, if your strategy is to earn Hive and hodl indefinitely, making Hive a home based business is not worthwhile. You won't have a tax liability until you cash out. But, if you don't make a profit, it's going to look suspicious that you are deducting so many business expenses.
For example, we just upgraded an old Mac Mini for a new one. The business benefit is that the new computer is faster, thus more useful for blogging and video editing. This can be deducted from our taxes. If we got into photography, we could deduct a camera and accessories. If we become travel writers, we could deduct travel expenses.
If we don't cash out at least our HBD rewards, then there is no income to offset those expenses. That means that we would not be able to deduct the expenses. We would be buying them out of pocket AND paying taxes on our income. Strategically, having a business allows you to purchase things and deduct them from your taxes.
We can deduct WeVideo, Vimeo, eBay fees, shipping fees, office supplies, mileage, Quickbooks Self-employed, tax preparation services, attorney fees (business-related), advertising and marketing costs, Google Workspace, and so much more. We can deduct just about anything that contributes to earning income from creating content or selling stuff on eBay. If we still did Uber and Lyft driving, we could deduct some of those expenses too.
In short, having a home-based business allows you to eat your cake and have your taxes too.
And, cashing out HBD, a stable-ish coin, means that there's no meaningful capital gains. In the 5 minutes it takes for LTC or Dash to hit Coinbase from Blocktrades, there won't be any significant capital gains. So, we also get to accumulate Hive.
Why A Business Credit Card For Hive Content Creation?
Part of the legitimate business process requires that you separate your personal expenses from your business expenses. Therefore, you will need a separate business bank account and credit card. You can get by with only a separate bank account. But, it is better to also have a credit card. Separate banking prevents comingling of funds. This makes it easier for you and for auditors to figure out where your money goes, if ever the need arises. Otherwise, it's a nightmare.
Most business checking accounts will offer you a debit card and checks. In addition, small business accounts will have a limit on the number of transactions per month. For example, our account has a limit of 50 transactions per month. Additional transactions have a fee. It is in our interest to have as few transactions as possible in our business account. It is also in our interest to keep our average daily balance above $2500.
A business credit card can help in both of these requirements. Paying off the credit card once per month, even weekly, reduces the amount of transactions. And, paying less frequently also means that we maintain a higher average daily balance. In terms of bank fees, a credit card can help minimize these costs.
Another way that a business credit card helps is that it acts as a buffer in case the card number is stolen. Your account can be emptied out and take some time to get back, if you use your debit card. A credit card, on the other hand, will buffer your checking account from loss if the account information is compromised.
Less compelling reasons for having business credit cards is that you may earn perks such as cash back or rewards. Cash back can be helpful in reducing your costs. Rewards points can be helpful for things like travel perks. There are also some insurance features that help reduce risk.
A business credit card is particularly useful, rather than a personal credit card, because business credit cards do not report their balances to your personal credit. If your monthly business expenses are significant, this can reflect poorly on your personal credit because you'll never have a zero balance. Although you may be paying off the card every month, your average balance will remain high. Business credit cards eliminate this problem.
As for why we selected the Capital One Spark Classic business card, it was low-hanging fruit. You do not need spectacular credit to qualify for this business card. They will start you off with a minimum of $500 in credit. In my experience, Capital One will also increase your limit periodically. And, you can request credit limit increases if they don't automatically apply them after a few months. In other words, the Capital One Spark Classic business card is a good starter card for new businesses.
If we had waited until March to apply for a business credit card, as originally planned, it would have been an American Express card as they generally offer higher credit limits. March is the soonest we qualify to upgrade and open additional credit lines.
JP Morgan Chase is rather finicky about issuing credit cards. We currently have a Chase card. However, they follow the 5/24 rule for applicants. They will reject you if you have had 5 or more credit inquiries or new credit lines in the past 24 months. That includes being added as an additional user to somebody else's account. It's going to be another couple years before we can open a business card with JP Morgan Chase.
Not Financial Advice
You can't take our situation to decide what you should do with your finances. We're insane. You might be better off consulting with professional advisers. You might even be in a different country where our tax rules don't apply.
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So you say that you registered Hive content creation as your business officially?
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Not specifically. The business is a media company. This allows for income from other platforms and activities, such as video production, writing, photography, etc. . .
The industry code registration is NAICS 71151 - Independent Artists, Writers, and Performers
As you can imagine, this is a broad range of activities for producing income.