Use separate bank accounts and cards for business and personal spending. It keeps your books accurate, makes tax time easier and helps show that your business is a distinct entity.
1Why it matters
When personal and business spending share an account, every transaction needs sorting, mistakes multiply and you cannot see how the business is really doing. Separate accounts also support your claim that expenses are business-related.
2How to separate them
- Open a business checking account in the business name
- Use a business credit card for business purchases only
- Pay yourself by transfer, as an owner draw or payroll, depending on your structure
- Stop paying personal bills from the business account
- Keep receipts for business purchases
3If they are already mixed
- Mark each personal transaction
- Record them as owner draws or contributions, not as expenses
- Ask your tax professional how to handle gray areas
Do not simply delete personal transactions. They still moved money, so they must be recorded correctly.
4Owner draws and contributions
Money you take out is a draw, and money you put in is a contribution. Recording them correctly keeps expenses and profit accurate. The right method depends on your business structure, so confirm it with your CPA.
5Make it a habit
A clear separation from the start saves hours every month. If your books are already tangled, a cleanup can sort them out and set up a simple system going forward.
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