How to separate your personal and business finances
When business and household money come out of the same account, it becomes hard to know how much your business really earns. It also makes your tax return harder, because every expense has to be reviewed to decide whether it’s personal or business. And if you operate as an LLC, mixing funds can weaken the protection that structure gives you.
The good news is that separating your finances doesn’t require a complicated system. These five steps will get you in order.
Five steps to get started
- Open a bank account only for the business. Everything you collect goes in there, and every business expense comes out of it.
- Use a card only for business expenses. That way every purchase is recorded in the right place from the start.
- Pay yourself in an orderly way. Set an amount and a fixed date to transfer money from the business to your personal account, instead of withdrawing whenever you need it.
- Save your receipts every week. A digital folder or a photo with your phone is enough, as long as you do it consistently.
- Review your numbers once a month. Take some time to reconcile your account and see what came in, what went out and what’s left, or hand this task to your accountant.
What if everything is already mixed?
It’s more common than you think, and it can be fixed. The first step is to open the business account today and start clean from now on. Everything before that can be organized and categorized calmly.
If you’d like help organizing your accounts, fill out the intake form and we’ll talk.
