Separate Business and Personal Finances

Many times, a new business owner will be tempted to run business finances through personal accounts. Do not mix the two by trying to use the same checking account for your home and business. It is imperative that you keep your personal and business finances separate.

The IRS does not look kindly on businesses that “co-mingle” personal and business monies. The fate of more than one small business owner has been determined based on this issue during an audit and not in the business’s favor.

Mixing business and personal finances will also cause you many problems with your accounting and tax computations. The accounting process becomes very complicated and creates a confusing paper trail when you use business funds for personal obligations and vice versa.

Business accounts are necessary for credibility when dealing with other businesses. Many of your vendors will not accept a check unless it is preprinted with your business name and address. It may also be difficult, if not impossible, to establish an open account with a supplier or wholesaler if you do not have a business bank account.