Separating Personal and Business Finances: A Step-by-Step Guide
Co-mingling funds is a recipe for tax disaster. Here is how to decouple your finances in one afternoon.
By Emily Clark · CPA
· 1 min read
Freelancing
Many solopreneurs run their business out of their personal checking account. It feels easier, until tax time comes or you get audited.
The Corporate Veil
If you have an LLC but treat your bank account like a personal piggy bank, a court can "pierce the corporate veil," meaning you lose your liability protection. Your personal assets (house, car) become fair game in a lawsuit.
Reimbursing Yourself
If you buy a business laptop with a personal card, submit an expense report to your business. The business writes you a check. This creates a clean "audit trail" proving it was a legitimate business expense.