Another reason to avoid commingling

My first recommendation to any new business owner, before we discuss tax savings, registering an LLC, or even pricing, is to open a separate checking account for the business.

As soon as possible, you must separate business assets from personal assets, especially cash.

Then you have to keep them separated. That means your business account should only have business transactions, and your personal account should only have personal transactions.

Failing to do this—mixing business and personal transactions in one bank account—is sloppy at best and financially costly at worst. IRS calls this avoidable practice commingling, and it’s just cause to deny deductible expenses, raising your tax bill.

But it can also cost you more than just taxes. Sloppy financial management can cause you to lose otherwise promising business deals.

I saw this tweet the other day from a capital advisor. He helps business owners secure funding to build and acquire businesses. If anyone knows what makes for a good or bad business deal, he does.

If you’re currently using your business funds to make regular personal purchases—lunches and coffee on the go, groceries, travel, crypto investments, whatever—understand you could be costing yourself future stress and money.