Separate your accounts
One of the best things you can do for your bookkeeping is to separate your business transactions from personal transactions, beginning now.
Whether you’re just starting out in business as an individual, or you’ve been in business for a while but never formalized, this one change can make all the difference. It doesn’t matter how small your business is, you can do this today:
Dedicate a personal checking account and credit card to your business transactions only.
You can open new accounts or repurpose existing accounts. If you use Stripe, Square, etc. to process credit card payments, send those deposits to your “business” account. Deposit your checks to that account. Pay all of your recurring and one-off expenses via dedicated checking account or credit card.
Stop accepting or making business payments via personal Venmo, Cashapp or Paypal accounts. These companies have been known to shut down accounts if they find out you’re using the personal versions for business purposes. Get a business Venmo/Paypal/etc. that is connected to your business bank account only, or change your payment policies altogether.
You can put personal money in your “business” checking account to fund your purchases or transfer out your profits, but if all of your business transactions are contained to specific business-dedicated accounts, you’ll be able to get those transactions into your tax return or your own planning documents much more easily than if you have to hunt through your mixed accounts to find your business income and expenses.
Banks typically require a business entity and an EIN to open a business account. Depending on your location, you may be able to register a DBA (doing business as) with your local municipality, county, or state, get an EIN (free via the IRS website), and open official business accounts. This would be ideal, but next best is to dedicate some personal accounts to business transactions only. Come tax time or planning time, you’ll be so glad you did this!
IMPORTANT: If you have an LLC, commingling personal and business transactions (including using a personal account instead of your business account) can put the legal protections of an LLC at risk, so that is a whole other level of need. For the purposes of this article, I’m talking to folks doing business as a sole proprietor, an individual without an LLC or other formal business structure.
🧮
Want to get bookkeeping off your plate so you can focus on running your business?
We would love to learn more about your business and find out if we're a mutual fit.
Book a free discovery call today!
🌱 This post was entirely written by me, Rosa, drawing on the knowledge gained during my careers in bookkeeping, dance and design, and my enjoyment in writing—entirely free of generative AI.