Reasons To Keep Your Business & Personal Finances Separate

Learn why treating your business as a separate entity should be your top priority when managing your money.

Managing your business finances can be complicated, more so if you’re doing it out of your personal account. Blurring the lines between your business and personal funds can put you at a disadvantage when it comes to certain tax benefits and can leave your personal assets and credit unprotected.

For these reasons and others, it’s important to keep your business and personal finances separate.

Tax Advantages

Many business owners choose to use a separate business account for their business finances to easily track expenses for tax purposes. These separate accounts allow you to keep accurate records, which is key to taking full advantage of all the possible tax deductions that may be available to you.

Also, if for any reason you’re audited by the IRS, you’ll save time and a significant amount of stress handing over business-only records.

A woman standing in a bakery with a clipboard. She is wearing a red apron.
Compare Options

Business Checking Accounts

Every business has different needs. Compare your options to find the right business checking account for your business.

Liability Protection

Mixing business and personal finances creates personal liability. One of the most important steps you can take to protect yourself and separate your finances is to choose a business structure.

Whether a sole proprietorship, corporation, or an LLC, the business structure will dictate everything from your risk and liability to how the IRS will retrieve your business taxes. Do your research and take the time to discuss your options with an attorney, CPA, and financial planner.

Building Business Credit

Business credit is a major financial tool that’s used to help you qualify for loans and other forms of financing. It’s also an essential tool for building relationships with vendors and other business-to-business sellers. Overall, it’s an indicator of how healthy and reliable your business is financially.

Choosing your business structure, obtaining a federal Employer Identification Number (EIN), and opening business bank accounts in your legal business name are all ways to begin building business credit. Now you can request business credit in your company name from the three main reporting agencies – Equifax®, Experian™, and Dun & Bradstreet®.

Summary

The task of separating business and personal finances can seem overwhelming, but it’s necessary for the long run. Doing so sets your business up for tax advantages and even higher profit margins — all while reducing potential risk to your personal assets.

A man puts a sign in a window that says
Life Guidance for:

Starting A Business

Starting a business can be both exciting and overwhelming. Use our thought-provoking resources to assist with developing a framework that best suits your needs.

Related Articles

Banking on each other.
Building stronger communities.®

I’m looking for…

This link takes you to something we think is useful.

But, it’s important to know you’re leaving the A+FCU website. Our site provides links to third party sites and resources not controlled or operated by A+FCU. Other websites may have privacy policies, security, and terms of use that aren’t the same as A+FCU’s. A+FCU isn’t responsible for third party content, agreements, or transactions on linked sites. If you’d rather not continue on to this site you can always call us or stop by a branch to find out more.