You might think your side business is too small to warrant having a separate business bank account. Maybe you’re just starting out and it feels too soon to bother juggling multiple accounts. Maybe you’ve been freelancing for years and never even thought about separating business finances from your personal ones.

For many small businesses, however, a separate business bank account is required to maintain certain legal safeguards and avoid unexpected account closures. But even business owners who don’t need one for legal reasons can still benefit from having a checking account that was actually built for business.

With a business checking account provided through the fintech company, Mercury, for example, the added tools and features make it feel more like banking and financial planning software rolled up into one convenient platform. Keep reading to find out which business owners need a business account, how it differs from a personal account, and what you’ll need to set one up.

Do you need a business bank account for your small business?

Whether your business is made up of just yourself or has hundreds of employees, you probably need a business account. If you have an LLC or you incorporated your business, for example, you are required to have one to maintain the legal safeguards that come with that status.

If you don’t separate your personal account from your business account, your creditors could have grounds to hold you personally liable for your company’s debt.

Depending on which institution you use for personal checking, you may not be allowed to use your existing checking account for business, no matter what type of business you have.

With that said there are some situations where you aren’t required to open a separate business account. Many sole proprietors or freelancers, for example, can technically use a personal account, provided the deposit agreement doesn’t say anything about not using it for business purposes.

Whether you’re legally required to open a business account or not, there are plenty of ways that having one can make running your business easier. To start, maintaining separate accounts just makes it a lot easier to keep track of your business income and expenses. That’s handy for budgeting and accounting purposes, but also makes it a lot easier to accurately file your taxes come tax season.

Having a business account can also make it easier to apply for business loans. Not only does it add legitimacy to your company, but it also makes it easy to provide bank statements that only show business-related revenue and expenses.

What’s the difference between a business checking account and a personal one?

A business and personal checking account look similar at first glance. Both allow you to make deposits and spend your money using a debit card, writing checks or by making certain types of transfers. Both also may come with FDIC insurance protecting deposits up to $250,000.

In addition to those standard features of a checking account, business accounts often come with a few extra features like the ability to accept credit card payments and seamless integrations with accounting and tax prep software to make managing your business finances and tax planning easier.

Many also allow you to add users to your account while also limiting their access and spending. Unlike adding a joint accountholder to your personal account who will then have all the same permissions as you, a business account allows you to tailor specified roles and spending controls for each user.

Mercury Account Features for Your Small Business

As an example of how an actual business bank account can do more than a standard personal bank account, take a look at accounts provided through Mercury. The fintech company partners with FDIC-insured banks to provide a range of online banking services tailored to business of all sizes.

That includes the Mercury, Mercury Plus and Mercury Pro accounts. With no monthly fees or minimum balance requirements, the standard Mercury account is a great entry-level account for new or small businesses that need the added financial planning tools of a business account without the added cost usually associated with them. As your business grows, you can upgrade to Mercury Plus (which comes with a $35 monthly fee) or Mercury Pro (for a $350 monthly fee).

Here’s a quick look at some of the Mercury business banking features that go beyond a standard checking account:

• Accept payments via credit card, Apple Pay and Google Pay.
• Generate invoices directly from your account. With Mercury Plus or Pro, you can even set up recurring invoices and payment reminders.
• Automatically match payments you receive to invoices so you can easily keep track of paid and outstanding invoices.
• Issue corporate cards to your employees, with tailored permissions for each one. That includes making the cards only usable for payments to specific merchants as well as setting custom spending limits and authorization requirements. You’ll also be able to set company-wide spending rules that apply to all account users.
• Reimburse expenses for up to five users per month on the entry-level account. With Mercury Plus, that increases to 20 users per month and you can add additional users for $5 per user per month. With Mercury Pro, you get up to 250 users per month.
• Automatically spot duplicate subscriptions so you can curb unnecessary spending.
• Issue cash back credit cards that earn 1.5% cash back on every transaction, while still leveraging the control over spending limits and transaction types on those company credit cards.
• Sync your account to third-party business tools like QuickBooks, Xero, Stripe, Slack and more.
• Create your own rules for coding transactions and expenses to easily manage cash flow through your account.

How to open a business account

Opening a business account requires a bit more documentation than you’d need for a personal account. But the process is still easy and decisions are typically made in one to two business days, so you’ll have your account up and running quickly.

Here are the key requirements you’ll need to have on hand when you apply for a business account:

• Official company formation documents
• IRS-Issued Employer Identification Number document
• Copy of government-issued ID for each founder or majority owner
• A physical address for your business. This can be a residential address, as long as it is the primary location you do business out of.
• Your legal business name
• A description of your industry and what your business does
• Your company’s source of funds
• Details about current and future operations

Bottom line

A business account is required for many types of business, regardless of size. But even if you’re a sole proprietor or freelancer, the added tools that usually come with a business account like the ones offered through Mercury make it worthwhile even if you aren’t legally required to have one.

*Mercury is a financial technology company, not a bank. Banking services provided through Choice Financial Group, Column N.A., and Evolve Bank & Trust; Members FDIC.

**The IO Card is issued by Patriot Bank, Member FDIC, pursuant to a license from Mastercard®. To receive cash back, your Mercury accounts must be open and in good standing, meaning they cannot be suspended, restricted, past due, or otherwise in default.

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Whether you’ve decided to start a business in retirement or you’re making the leap to trade your day job to fulfill your passion, handling your small business’s finances can get complicated and messy fast if you don’t have the right tools. But which tools do you really need? How do you decide which ones to get?

To help you build a tech stack that works for your needs, look into adding these seven tech tools to manage your finances easily and accurately.

1. Business bank account

Not only is a business bank account required for most small businesses, it can often make your life as a business owner easier. With a tech-forward option like the business checking account provided through the fintech company Mercury, for example, you’ll get extra features like third-party integrations with your accounting software, payment processing service and other important business tools. It can even generate invoices, match incoming payments to those invoices and do dozens of other handy functions that streamline the financial side of your business.

Whichever business account you choose, make sure to check the fees, minimum balance and other requirements. Many banks charge fees, especially for accounts with more advanced tools and features. Accounts provided through Mercury come with no annual or hidden fees and no minimum balance requirements.

2. Accounting software

Almost as important as a business account, accounting software is integral for ensuring you’re accurately keeping track of your revenue and costs. This is also where you’ll be able to create and keep track of invoices, manage your bills and generate reports to analyze the financial health of your business.

With that said, there can be a lot of variation between programs, and between the tiered plans offered by each software. So it’s important to shop around and compare the features that come at each price point across a few different programs before you commit to any particular accounting software.

It also helps to have software that integrates with your business account. While not everyone offers this, Mercury business accounts integrate with QuickBooks and Xero, two of the leading accounting software options. Subscribers to Mercury's paid plan, Mercury Pro, also get access to NetSuite integrations. This can automate a lot of the data syncing and reporting needed to keep your accounting up to date and accurate.

3. Payment processor

Whether you sell a physical product or offer a service, you need a way to process various types of payments like credit cards and mobile payments. There are plenty of different payment processing services out there, with Stripe and Square being two of the more well known brands.

But the fee structure and account requirements vary significantly, so it’s important to take a close look at each one and estimate how much you’ll pay each month based on the types of transactions you process the most.

With a Mercury account, you’d be able to link Stripe to your checking account to take advantage of Mercury’s invoice generation features and set up transfers from your Stripe to your Mercury account. If you’re not sure where to start with choosing a payment processor, this is a convenient place to start.

4. Tax software

Getting your taxes right each year is as stressful as it is important. So working with a great tax prep software that caters to small businesses is key. Whether you want to hire a pro or file them yourselves, opt for tax prep software that at least offers the option to ask a live tax expert questions as you go.

Ideally, it should also integrate with your preferred accounting software, too. This just makes it easier to import your documents and lower the risk of errors as you fill out your tax return.

5. Payroll software

There’s more to paying your employees than cutting checks. With payroll software, you can easily calculate paychecks, withhold taxes and other deductions and keep up with evolving employment laws and compliance.

It also helps track time-off accruals and usage and provide an employee portal where your employees can easily check pay history, get pay stubs or change direct deposit information. Come tax time, payroll software can even help with generating W-2s to employees.

Overall, it’s an important way to cut down on the manual calculations and paperwork involved in paying employees. So if your business is made up of more than just you, this is a must.

If your team is still relatively small, though, look for software that’s scalable. That is, you want payroll software that offers a lower cost basic version so you’re not paying for robust tools that you don’t need yet or the ability to process payroll for hundreds of employees when you currently only have a couple of people on your staff.

6. Financial planning software

Financial planning software allows you to both track your past performance and plan for the future. It will include features like budgeting, forecasting and scenario planning that help you make data-driven decisions and set financial goals or projections for your business.

To start, you might want to keep costs down by opting for accounting software that includes at least a few basic financial planning features. But, as you grow, explore more advanced tools that offer things like automated identification of cost saving or growth opportunities.

7. Secure financial document storage

As a small business owner, you’ve got a growing pile of important documents to keep track of: Receipts, payroll records, permits and licenses, insurance and the list goes on. While you might not need to access all of these documents in your day-to-day, it’s important to store financial documents the right way so that you can easily find them when you do need them.

Both digital and physical storage options exist. But even with physical documents, it’s a good idea to save scanned copies in a secure digital location, just so you have a backup.

How to build the right tech stack for your small business

As mentioned earlier, integration is key. Having seven different financial tools that can’t talk to each other will force you to put in a lot of manual effort to keep the data synced across each one. So, whenever adding a new tool to your toolbelt, start by checking which third-party platforms your existing tools integrate with already.

But, even before looking at integrations, look for software that consolidates multiple tools into one. Even if you don’t need some of the more advanced features just yet, starting with an entry-level version of a software that offers optional add-ons or upgrades will make it much easier for your business to scale without having to overhaul your tech stack as you grow.

Say business is booming and manually generating invoices each month is getting tedious, compare the cost of buying new software to that of upgrading what you already have. For example, upgrading your Mercury business account to Mercury Plus (which offers recurring invoice generation, among many other things) is priced at just $35 per month.

That may be more cost-effective and easier than adding a brand new piece of software to your tech stack, especially when you factor in the other features that come with the upgraded account.

*Mercury is a financial technology company, not a bank. Banking services provided through Choice Financial Group, Column N.A., and Evolve Bank & Trust; Members FDIC.

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Another tariff hike could soon impact global trade and U.S. consumers.

Panama is slated to impose new tariffs this month for crossing ships seeking passage through the Panama Canal. Over 70% of traffic in the critical waterway comes from U.S. naval and merchant ships each year.

The canal’s tariff modifications come after an extreme drought substantially reduced water levels and limited the channel’s capacity for crossing ships. Due to the resulting revenue loss, authorities hiked the fees per vessel.

Separately, President-elect Donald Trump has proposed and continues to defend his plans to impose tariffs on all foreign goods entering the U.S., a campaign vow that economists warn would raise prices for U.S. consumers even further.

Trump has also recently expressed a desire to take control of the Panama Canal, claiming the waterway's control represents a strategic loss for American interests.

Here’s what you need to know about the Panama Canal's upcoming fee hikes and what they mean for you as a consumer.

Who operates the Panama Canal?

The Panama Canal is operated by the Panama Canal Authority (ACP), a Panama government agency that has been responsible for the canal's management for the last 25 years.

As mentioned, Panama is implementing a series of tariff modifications this year to relieve congestion at the canal following its severe drought.

• At one point, Panama authorities said ship crossings were cut by 36% due to low water levels.
• The Associated Press reported that this cost Panama between $500 million and $700 million in 2024.

The disruption caused a major problem for global trade: traffic jams.

This led to delays, higher shipping costs, inflationary pressure on goods, and overall growing uncertainty about the reliability of the Panama Canal’s transit system. Why is this a big deal?

The canal serves more than 144 maritime routes and connects 160 countries, reaching as many as 1,700 ports in the world. That’s not all: more than 70% of cargo ships crossing the 80-kilometer route are going or coming from the United States.

The updated fees, meant to ease congestion, will impact every nation using the Panama Canal, not just the U.S.

Some fees will impact transit reservations, for instance:

• A regular vessel will have to pay $12,000 starting January 1 to reserve the right of passage through the canal.
• Previously, the tariff was $10,500. Super vessels and large container ships will also face transit hikes.

Shippers will be charged 1% of the reservation tariff if they swap slots within 14 days or less. Additionally, any ship that arrives at the canal and needs a last-minute reservation will face even higher penalties. A regular vessel will face a $25,000 tariff, more than double the normal rate.

Those are just a few of the changes that will be in effect for all ships crossing the canal starting this year, according to the Panama Canal Authority.

Could Panama Canal tariffs spike U.S. consumer costs?

Panama’s tariff modifications will increase the shipping costs for U.S. merchant ships, which will impact American businesses and, as a result, may cost U.S. consumers more.

Businesses generally pass along tariff costs to their consumers by inflating prices. That’s mainly because tariffs may reduce business profits, so they must recoup those costs.

At the same time, Trump has remained firm in his pledge to increase tariffs on all imports entering the United States. The president-elect’s most prominent proposal aims to impose a universal 20% tariff and a 100% rate on Chinese imports.

As Kiplinger has reported, economists warn the across-the-board tariffs would drive shopping prices higher in 2025. Everyday items like clothes, toys, furniture, or other household appliances would all see steeper prices, shrinking your spending power.

Some U.S. states would also be hit harder by tariffs than others, as their economies rely more on imports.

Tariffs bottom line: What’s next for U.S. consumers

Tariffs will be a prominent topic in 2025 as the U.S. president-elect plans to impose steep taxes on all imported goods.

As mentioned, experts say that businesses usually pass along some of the costs of tariffs to consumers by hiking the price of goods. While Panama’s new tariffs on goods crossing its waterway are global, they may impact the price of some goods as businesses adjust to higher fees.

Separately, Panama is one of three countries without an inheritance tax, making it one of the top retiree-friendly countries in the world. Additionally, as reported by Kiplinger, many Americans see tax benefits of retiring in Panama. including a lower cost of living, lower property taxes, and tax breaks.

For now, stay tuned on how tariffs may come to impact your wallet in 2025.

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To help you understand how interest rates are impacting small businesses, and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

Higher interest rates hurt all borrowers. But they hit small businesses extra hard. Unfortunately, for small companies, higher borrowing costs are unlikely to ease much anytime soon. So, many small firms will cut back on plans to hire, expand or invest in new capital equipment.

Just how much costlier is credit these days? In 2019, the prime rate, the benchmark rate for loans to small borrowers, was 5.5%. Now, it’s up to 8.5%. Small firms are paying 9.1% on average, per the National Federation of Independent Business. And even that may be an understatement.

Owners of small businesses often depend on credit cards or personal loans, which carry rates far higher than corporate bank loans usually do. Interest costs are nearing 7% of revenues for small-business borrowers. In 2021, they were 6%. If rates hold steady, the figure will hit 8% by 2030.

Credit has gotten notably tighter, too. Just 13% of small-business loan applications to large banks are getting approved these days, roughly half the rate back in 2019.  Smaller banks and credit unions are now approving 20% of small business applications, vs. 40%-50% in 2019.

Large companies face tougher standards, too. But many of them can borrow directly by issuing bonds or commercial paper, albeit at the highest yields in many years. For many small businesses, there’s no choice but to cut back — fewer hires, delayed purchases of needed equipment, holding off on moving to a bigger space, etc.

Business, overall, is OK, but many small companies can’t finance the investments to grow. (If you sell to small firms, you’re already seeing this belt-tightening. Unfortunately, there’s little hope of it ending anytime soon. If anything, expect more retrenchment.)

One upside of higher rates: Some small firms can earn more on their cash if they carry significant cash balances. The days of 0% on savings accounts are over. There are also some alternate credit sources small firms may be able to tap: Loans and loan guarantees from Uncle Sam, in particular. 

Various programs run by the Small Business Administration aim to help small companies access credit. For example, the SBA 7(a) loan program provides loans that can be used for working capital or to buy a business at the prime rate plus a margin the borrower and lender agree to. SBA 504 loans can be used to purchase owner-occupied commercial properties.

The Department of Agriculture provides loan guarantees to small businesses in rural areas through its Business and Industry Loan Guarantees Program. A wide range of loans are eligible, with guarantees of up to 80% of the amount borrowed for many purposes. 

Even some private grants are available to small companies. For instance, Verizon offers $10,000 awards plus consulting via its Small Business Digital Ready program.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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At any given time, entrepreneurs are juggling many tasks, especially in the early days of launching a business. 

If you’re an entrepreneur in the startup phase of your journey, you’re busy bringing your idea to life and strategically planning to enter the market. But as you do so, it’s vital to establish the right financial structures for your venture. Managing startup finances is easier when you prioritize doing so at the beginning. What’s more, a 2023 survey by online loan marketplace company Lendio found that small business owners “are primarily facing challenges related to the economy (23%), inflation (21%) and other financial concerns (14%).” By getting a head start on your startup finances, you’ll be better prepared to navigate these challenges (such as the next recession) as they arise.  

Common mistakes 

When it comes to managing startup finances, Eric Kala, the CEO of Avid Wealth Partners, a San Antonio, Texas-based wealth management and financial planning firm, has often seen entrepreneurs make four common mistakes.

First, they fail to establish the correct business entity or structure to financially and legally protect them down the line. This can limit their flexibility in the future. Regarding the specific structure or entity you should pursue, Kala recommends starting by forming an LLC. However, he stresses that you should always consult professional help catered to your unique situation before you take that step. 

“It creates a clear delineation between individual and business finances,” says Kala. “We’re not filing under your name, per se. We’re setting things up as a business, which allows us to be more nimble. For the $500 to $1,000 it costs to set up an LLC, it allows the entrepreneur to file as a partnership or an S-corporation later on relatively easily.” 

Additionally, according to Kala, that delineation can give entrepreneurs certain legal and creditor protections, putting them in a stronger position to weather tough circumstances. For instance, if you form an LLC and your business gets sued, your personal assets are protected in most cases. 

That lack of delineation between personal and business finances ties into another of the most damaging mistakes Kala has seen some entrepreneurs make: using their business accounts as second lifestyle accounts and writing off luxury expenses such as boats and planes.

If audited, these business owners will likely face legal and financial repercussions. Separating your personal and business accounts helps you avoid these murky situations. 

Kala has also noticed that some entrepreneurs often don’t audit-proof their business by keeping good books and records as they set up their finances. Some entrepreneurs don’t implement the most essential tools, such as accounting software, to help them track their expenses and spending. Without accurate records, they can’t unlock their full tax benefits when it’s time to file. 

But Kala emphasizes that having the right tools is not enough. Entrepreneurs sometimes don’t classify their financials correctly, which costs them later. For instance, they will write off certain items, such as furniture and computers, as expenses rather than depreciating assets. This erroneous classification makes the company seem like it has more expenses than it actually has, which will unfavorably impact its EBITDA (earnings before interest, taxes, depreciation and amortization). 

“When the company has continued growth and wants to expand and inevitably goes to a bank, those bankers aren’t going to look at backing those depreciable expenses out,” says Kala. “They’re just going to say, ‘Well, you have a lot of expenses, and your revenue isn’t really where we want it to be.’” 

Initial steps   

Once you have your business plan in place, Kala advises, you should start vetting experts to guide you, namely, a business lawyer with expertise in your industry, a CPA and a financial advisor. 

“As you’re going through and vetting, it’s really about having conversations,” says Kala. “The advisors you work with on a consistent basis need to have not only knowledge based off of their academic studies, but also based off of their work experiences and previous clientele.” 

Kala explains that once you have the right professionals in your corner — ones you trust and feel comfortable around — you should set up your business entity or structure. Next, open business operating and money market accounts. After those accounts are in place, work with your CPA to get reliable accounting software and start logging your expenses and depreciable items correctly.  

Contingency plans  

In business, things don’t always go as planned. Kala stresses that every entrepreneur should be prepared for worst-case scenarios. 

“Really think about contingency planning,” says Kala. “Examine things like buy-sell agreements and your loan documents.”

Entrepreneurs, he explains, should ask detailed questions when reviewing their documents. For instance, if you’re an entrepreneur with a business partner, you should find out whether or not a loan your business partner signed would get called by the bank in the event that they pass away. If you have a family business, you should create a succession plan in the event of your passing. If you don’t have a family business, you should plan how you’d like your business to continue if you pass away (or, if you have a business partner, if they pass away).

Other worst-case scenarios to prepare for include injuries, recessions, industry disruptions and natural disasters. The better prepared you are, the better off you will be. Kala recommends that entrepreneurs speak with their trusted advisors to create action plans that can help them overcome such challenges.

Looking ahead  

There's no need to panic if you’re already well into your business and haven’t taken all or some of these steps, says Kala. 

“The things that have happened in the past are in the past,” he notes. “Look forward and correct the situation.” Ultimately, Kala says, the difference between successful and unsuccessful businesses often comes down to not just hard work, but establishing the right amount of financial discipline.

Investment advice is offered through Avid Wealth Partners LLC, a registered investment adviser. Insurance products are offered through Avid Risk Management LLC. Avid Wealth Partners is the dba marketing name for Avid Wealth Partners LLC, Avid Risk Management LLC, Avid Consulting LLC, and Avid Capital LLC. 

The information contained herein is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. Always seek professional advice.

Who: Jeff Gietzen

What: Hardware store owner

Where: Glen Arbor, Mich.

How long have you owned your store? My wife, Georgia, and I acquired our business, Northwoods Hardware, Home, Gift and Nursery, 11 years ago. Our background before that was 35 years in supermarkets, in the Grand Rapids/greater western Michigan area. The business was Georgia’s family’s business, started by her grandfather, and the family ended up selling it to the wholesaler. The hardware store here had been for sale for about a year and a half, and we ended up buying it and moving here.

Does your wife work for the business? Yes, Georgia does our home-goods and décor buying and merchandising. Full-time, we have about six people, and then in the summer we typically add another four to six people. Our daughter, Gillian, also works with us here at the hardware store.

Who are your clientele? A mix of year-round people, who are mostly retired, and some business owners, plus seasonal homeowners and a lot of tourists. In the summer, it’s a more upscale area. Glen Arbor is in Leelanau County, which is partly surrounded by Lake Michigan. There is a national park here called Sleeping Bear Dunes. People come from western Michigan, Chicago, St. Louis, Indianapolis, Cincinnati, Pittsburgh, Dayton, Detroit. A lot of people venture north for the summer. Our customers are also the contractors who end up taking care of the homes and condominiums that need work.

How has the pandemic affected business? There was a period in spring 2020 when we shut the doors, but we did curbside sales and delivery. Once we all started to understand the virus, we opened the hardware store back up, but we required masks, did multiple daily cleanings and posted a sign for social distancing. We did apply for the first round of PPP loans and were awarded that as an offset to what initially was a lack of sales. But ironically, if we look at the first year of COVID, our sales ended up rather substantially because many of the people that have second homes here relocated here. Everybody started to get bored, so they wanted projects to do.

How has the supply-chain disruption impacted your business? Initially, there wasn’t really too much of an impact. But we were affected as businesses started to reopen—especially some of those businesses with manufacturers that had shut down and had a hard time getting their plants back online quickly. Then a lot of products were held up—and probably are still held up, in some cases. We are starting to slowly see some areas improve, and our wholesaler continues to do a good job of sharing the status of the suppliers and the supply chain. But prices have gone up significantly. Metal products and paint are categories where there have been a lot of price increases.

What products have been most disrupted by supply-chain issues? Anything metal-related or plastic-related. Normally, we would get most of our grills for the upcoming summer season in December, but there’s a good portion that we have not yet received, and probably won’t until March or April.

You’re expanding your store. Business must be good. We are a small hardware store, so we’re not going to be able to compete on price with the big-box stores. Our strength is customer service and attention to detail. Also, we’re very involved in the community, helping others and nonprofits. We try to greet every customer who comes in the store. Many of them I know by name. We really have tried to go above and beyond in our commitment to customers.

Whether the upcoming presidential election is a battle for the soul of the nation or the way to keep America great is a question we will leave to you to answer. But the election will have important ramifications for your financial well-being, and we’re all over that agenda. How will each of the candidates help steer the economy? What might your tax bill be? Is your portfolio headed for gains or losses? For those questions, the person living at 1600 Pennsylvania Avenue for the next four years matters.

At the start of the year, a sound economy, rock-bottom unemployment rates and a roaring bull market made it Donald Trump’s election to lose. Then came the coronavirus pandemic, exacting a vast and tragic human toll, putting a dramatic end to the longest economic expansion and bull market on record, and robbing tens of millions of Americans of their livelihood.

It remains to be seen whether voters will renew President Trump’s lease on the White House in November, but former Vice President Joe Biden became a more formidable contender over the summer, if you believe the polls and the betting markets. In early July, policy analysts at investment firm Raymond James gave Biden a 55% chance of winning the presidency.

But it bears repeating that the circumstances surrounding the 2020 election are unique, and for insights into who will ultimately claim victory, you might be better off asking an epidemiologist than a political consultant. Each of the presidential candidates faces “significant challenges,” according to analysts at Wells Fargo Investment Institute. “Voter perception of how President Trump manages the pandemic and economic reopening is key to his reelection bid.”

What is clear is that the country has rarely been more polarized. “The U.S. presidential election [is] set to take place against the most tumultuous domestic backdrop since 1968,” write analysts at BlackRock Investment Institute in their 2020 Midyear Outlook. “The two parties are as far apart on policy as they have ever been, making the result consequential for markets.”

Taxing matters. Taxes will be front and center. A Biden administration would target the 2017 corporate tax cuts for a partial rollback and float the possibility of higher rates on capital gains and dividends, as well as an expansion of payroll taxes for wealthy Americans. That would nick corporate profits and possibly dampen the animal spirits of investors, especially high-net-worth taxpayers, but would be at least partially offset by aggressive economic stimulus, says Solita Marcelli, chief investment officer, Americas, at UBS Global Wealth Management. A Trump 2.0 administration would be incrementally positive for economic growth and the stock market, Marcelli says, counterbalanced by the risk of a re-escalation of trade wars.

Although the presidential candidates loom large during election season, Congress holds the key to big policy shifts. “A clean sweep, whether red or blue, makes a big difference,” says Marcelli. “In a divided government, enacting tax and spending legislation becomes more difficult. As a result, regulatory and trade policy become the main policy drivers.”

The chances of a blue sweep were rising midsummer, with Raymond James giving Democrats a 50% chance of taking back the Senate and a 95% chance of keeping the House. Republicans are defending 23 seats in the Senate; Democrats, 12. Democrats need to net four seats (or three seats plus the presidency) to flip the Senate. The toss-up Senate races as of July included Arizona, Colorado, Maine and North Carolina.

Expect some heated rhetoric and volatile markets in the run-up to Election Day.

Sandra Block, Lisa Gerstner, Nellie S. Huang and Anne Smith contributed to this story.