How Do You Separate Your Biz vs Personal $?

When you start your business, getting your finances in order should be step #1, but how do you separate your business versus your personal finances? We are going over what accounts you should open, how you should track your income and expenses and what to do if you can’t open a separate account. Think of your expenses as a box of tangled cords. Instead of having all of your personal and business cords (finances) in one big box, take the time to separate them into two boxes. With your finances in separate boxes (accounts), it becomes easily visible to see what belongs where and to track your finances. 

Less is more, but with finances, more details are better. 

What we’re talking about

What Is A Separate Account? What Business Accounts Do You Need? What Do You Do If You Can’t Have A Separate Account?

What Is A Separate Account?

A separate account is needed for any money that is coming into your account or going out of your account. This means that when it comes to your business, for every expense you pay and for the money you are paid, you should be utilizing an account that isn’t the same as where you pay for your personal groceries or your rent or your electricity bill. 

What Business Accounts Do You Need?

I recommend you have 3 business accounts; 1 checking and 2 savings. Your savings accounts should consist of one general savings and one for business tax savings. Your checking account will be the place where you receive payments, pay yourself and where your savings will come from. If you have PayPal, you should also create a separate account to track any business transactions as well and link it to your business checking account. You can also open a business credit card, but be cautious of your spending habits and consider whether this is something you truly need. 

What Do You Do If You Can’t Have A Separate Account?

There are instances in which you simply cannot open a separate business account. One instance is where you have created an LLC and it’s cumbersome to open an account since you’ll need your EIN number along with a number of other details and proof to show you are the decision maker for the LLC. In these cases, I recommend you keep meticulous details and track everything in a spreadsheet with receipts filed away, so that when tax time comes around, you’ll still have all of your finances in order. 

Have you set up separate bank accounts for your business?

LINKS MENTIONED

Income & Expense Tracking Spreadsheet - Biz Finance Survival Kit