It’s Not Personal, It’s Business—at Least, When It Comes to Finances

separating business and personal bank accounts

In every session of the Money Clarity program, we hear the same responses from business owners and freelancer participants when we ask: Have you separated your business and personal bank accounts?

“No,” so many tell us.

But should you?

Yes, say financial experts, emphatically—regardless of your size. “Even if a business is small, separate accounts teach financial discipline,” says Certified Financial Planner Cathy Curtis.

Keeping separate accounts also has other benefits for freelancers and small business owners:

  1. Organization. It makes it far easier to track expenses and payments for your business if they’re not intermingled with personal stuff like your credit card bills and that fro-yo you bought at lunch. As Lauren Lyons Cole, CFP, says, “Separate business and personal bank accounts and credit cards simplify record keeping.”

  2. Taxes. A lack of separation may cause more scrutiny with the IRS. In addition to the audit risk, there’s also the matter of delineating business expenses (and proving they really were for your business) if you want to claim them as deductions. “Keep them separate from the beginning—don’t wait,” says Cole.

  3. Professionalism. This one is sort of a no-brainer, but if you want your business to be taken seriously as a business and not just as a fun pastime, make sure you present yourself professionally in every aspect. That includes your business name on checks and invoices. Galia Gichon makes an astute point: Freelancers should think of themselves as CEO, treat their businesses with respect and take themselves seriously. Separate accounts and credit cards are part of doing that.

If you’re still depositing business checks into your personal bank account, and confused about how to separate them and how to pay yourself, read our guide to setting up separate accounts.

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