Avoid Mixing Personal and Business Accounts

Small business owners and independent contractors are always looking for ways to save time. If you run your own business (or want to start one), it might seem tempting to have a combined business and personal bank account, but it’s not a good idea.

Here are four reasons why personal and business bank accounts simply shouldn’t mingle:

1. Mixing business and personal funds can lead to tax problems. Co-mingling makes it difficult to separate expenses accurately. This can lead to errors when filing tax returns, potentially attracting penalties or audits from the IRS and state tax authorities. And if the IRS audits you, expect more scrutiny.

2. Separate accounts convey that you’re running a professional operation. Whether you’re working as a small business owner or independent contractor, professionalism is a big part of running a company. Business partners, customers, clients and associates should see that you take finances seriously.

Paying business expenses with business checks adds the appearance of professionalism and credibility to your company. Paying business expenses with personal checks does the opposite.

3. Keeping to a budget requires discipline and separate accounts make it easier. Creating and sticking to a personal or company financial plan requires good information. Suppose you mix personal and business bank accounts. In that case, it’s difficult to have a clear paper trail or an obvious online statement to track and assess your monthly spending patterns and customer sales.

Separate accounts can also help with paying bills on time. It’s much easier to set up automatic bill pay and savings withdrawals when you’ve established separate and distinct personal and business checking, savings and investment accounts.

4. Co-mingling funds may create legal risks. Blurring the line between personal and business finances can lead to personal liability for business debts. In extreme cases, it can result in “piercing of the corporate veil,” exposing personal assets to business-related liabilities.

Keep Finances Separate and Organized

Separate accounts make tracking and reporting financial transactions easier, resulting in more accurate financial statements. Contact Kirsch CPA Group with questions about the best way to maintain accounts and use accounting software.

Schedule an appointment to learn how we can support you

© Copyright 2025. All rights reserved.