How to separate business and personal finances (and fix a mixed account)

The single biggest improvement most owners can make to their books is a second checking account.

Why it matters

• Every personal transaction in the business account is one you have to exclude by hand.
• The IRS and your bank treat mixed accounts as a red flag.
• An LLC's liability protection can be pierced if you commingle funds.

The afternoon fix

1. Open a free business checking account (Mercury, Relay, Bluevine, Novo, or your bank).
2. Get a business credit or debit card.
3. Move business subscriptions and autopays to the new account.
4. Pay yourself by transfer (an owner draw) instead of spending from the business account.

Cleaning up the past

Upload the mixed statements and mark personal transactions as owner draws as you review. ProfitBooks learns which vendors are personal for you, so the second month is faster than the first.