Welcome back to our series, Best Practices in Accounting & Finance. Through this series we tackle some of the big questions small business owners have regarding bookkeeping. We take the hassle of bookkeeping away from small businesses. This way, you can focus on income producing activities.
Let’s jump into this week’s episode.
The question: Should I keep my business accounts separate from my personal accounts?
The answer: Yes! Legally you are not required to have a separate business account from your personal account, especially if you are a sole proprietor. However, our recommendation is to keep things separate. The best way to do this is by having a personal account and a separate bank account for business.
The same applies to credit cards. As a small business owner, you might end up using a personal credit card (this is different than a business credit card) for business purposes. That is fine if you make sure that all charges that go through that credit card are only for the business. Co-mingling funds for business and personal use is never a good thing. When you have a business, certain expenses you do that relate to your business are tax deductible. If you start to co-mingle the funds under one checking or credit card account, it’s hard for you to figure out if your business is profitable. It’s also quite possible that you might forget whether a transaction is a personal or business expense. This could get you into trouble should you ever get audited. It’s a huge red flag to the auditor if they see that you co-mingle the funds. The best way to stay out of any trouble is to keep your business and personal accounts separate.
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