There’s usually a to-do list when starting a business. This is to help set yourself up for financial success with this new venture. At the top of that list should be to separate business and personal finances.

Remember this business is separate from you and your personal finances.

Yes. They are tangled because hopefully the  business is paying you and therefore, helping out with your bills. But they shouldn’t actually be tangled. While it may feel challenging to keep things separate, it’s a must when it comes to money!

Why You Should Separate Business and Personal Finances

You might ask how do I actually do that? 

For starters, you need separate bank accounts. You shouldn’t use the same account for business and personal activity. 

Go ahead open that bank account. If you don’t have a separate business bank account, I recommend Bank Novo. (If you use my link, you’ll get $40 just for opening the account!)

You don’t want to mix your personal and business funds. If you do, how will you know which expenses belong to your business? How will you know if your business is actually making a profit?

Make your life simpler and open that separate bank account. I promise it will make your life easier once it’s all set up and you’ve established good habits.

Let’s cover why.

1. Cleaner and simpler

Separating your finances makes your books cleaner and get this, it will reduce your tax prep time. 

The average business owner spends way too many hours (15-24 hours)  a year preparing their tax return. That’s if the taxpayer prepares it themselves. It’s not easy work. And trust me, it gets even more challenging if you don’t separate business and personal finances.

record keeping Heather Ryan | RV Tax Queen |

Your books will be so much easier and less costly to prepare if you don’t co-mingle business and personal expenses.

I see this all too often with business owners, some even years into their business. They don’t have a separate business account. When they run low on personal funds, they rely on their business cards.

Quite often, they don’t keep up with their books weekly. By the end of the year, they have to untangle a huge mess of transactions. 

Can you remember what you bought last week and why? Neither can I. Now think back 3, 6, or even 12 months. I can see why it would be so frustrating to have to play catch up and why so many procrastinate.

Separating your finances makes your books cleaner and get this, it will reduce your tax prep time. 

The average business owner spends way too many hours (15-24 hours)  a year preparing their tax return. That’s if the taxpayer prepares it themselves. It’s not easy work. And trust me, it gets even more challenging if you don’t separate business and personal finances.

It also means you lose out on one of the best benefits of having books – to gain insight into your business and make savvy financial decisions. 

Keep it clean, and keep up with the work.  You’ll improve your life, business, taxes, and even your stress levels. Everything financial should get easier. Let the software do the heavy lifting. 

One of the best reasons to get a business bank account is for how well it works with accounting software. You can link your bank account to the software and it will download all transactions. This makes bookkeeping so much easier because it cuts out data entry. Then all you have to do is categorize the transaction and attach a receipt.

If you don’t have a separate business entity and operate your business as a sole proprietor, have no fear. You can still open a separate bank account using your name. While it might not be specifically designed for “business”, it will help you separate business and personal finances if you only use it for business purposes.

Here are a few more caveats related to separate business and personal finances:   

Credit Cards

Like your bank accounts, you need to have separate credit cards. If you don’t have a business credit card, get one. It’s also possible to use a business debit card in lieu of a credit card. Whatever you do, don’t use a personal card. Once you have both accounts, be careful of which card you use when making purchases.

Shared Expenses

For many business owners, one expense may be used for both business and personal purposes. A common example of this is a cell phone bill. Many do not have a separate business phone and that’s ok. However, you’ll need to estimate how much you use the phone for business vs. personal. It happens sometimes, but try to limit these items. In these cases, it’s better to pay the expense personally and reimburse yourself from the business account for the business use.

Check-out Twice 

If you hit up a physical store, no problem. Check out twice or have your partner or spouse buy the personal items while you pay for the business stuff. Separate the items and separate payments. 

No excuses. It only takes a minute longer. Plus, most cashiers are fine with processing more than one transaction for a customer.

2. Lower your risk

You can lower your legal (no, I’m not a lawyer or offering legal advice) risk by separating your business and personal accounts.

If you want to limit your liability, keep your finances separate. This applies to any business organized as an LLC, S-Corporation, or C-Corporation. You risk the legal protections if you co-mingle funds. 

One of the most coveted benefits of an LLC or Corporation is legal liability protection. Sole proprietors operating under a taxpayer’s legal name and partnerships not set up as LLCs or LLPs do not have this limited liability protection. If something goes wrong in the business, it could be a problem.

Have you heard of piercing the corporate veil? That’s what this means. Mixing business and personal finances and not treating the business as separate from yourself. A judge could rule that you do not have limited liability based on how you operate the business.  

Small businesses often organize as an LLC to limit liability. The point is to separate business from personal.

If you expect to ever own anything of value or have kids or get married or just want to shield yourself personally, it’s wise to have some legal separation. I urge you to talk to a lawyer if this a major concern. 

To protect that limited liability, you have to treat the business as separate from you. One key factor courts look at is if you separate business and personal finances.

3. Don’t overpay taxes

Dare I say it. If you don’t separate business and personal finances, you could overpay on taxes.

When you mix business and personal, it’s hard to keep up your books. Maybe that’s why you always get frustrated when you try to work on the numbers?

Falling behind is a big problem. If you wait until year-end, you’re not going to remember many transaction details. You may think that you can remember but that’s often not the case. 

For example, do you remember what you ate for dinner three Thursdays ago?

Didn’t think so.

The IRS wants you to keep very clear records of your business expenses. Unlike a typical W-2 employees, business owners get to deduct expenses from their income. To justify the deductions, you need to keep good records. If you get audited, the IRS will ask for the books and receipts. If you don’t have them, the IRS can deny expenses. Now you could end up owing more taxes, penalties, and interest.

If you don’t have receipts, and you don’t have notes, you don’t have a record justifying taking that deduction. You’ll most likely lose to the IRS each time. You may have spent money on the business but since you didn’t track it, it can be hard, if not impossible, to prove. 

Even if you work with the tax prep professional, you still need to keep good records including books and receipts. Many tax preparers won’t ask for those records. They simply rely on your word unless something stands out to them.

Without clean books, it’s likely you’re overpaying your taxes. You most likely are missing out on deductions when you can’t remember which was business or personal. 

Why not limit this risk by keeping your finances separate? Good habits give a tax preparer and the IRS confidence in your case.

Bonus: What to look for when opening a business bank account.

We’ve gone over why you need to separate business and personal finances. Let’s get into how.

You need to create separate bank accounts using the business’s name and EIN. Most bank do offer specific business accounts.

It’s ok if you don’t have a separate business name and you operate using your legal name and your social security. You should still go ahead and open a separate bank account even if it’s not specifically for business. 

Here are my tips on what to look for. Don’t forget to consider which features you truly need.
  • Do you want to be able to mobile deposit checks?

  • Do you need a physical branch to deposit cash? Do you want to pay bills online?

  • Do you travel and need to have branches available in a wide area?

  • Do you want to use an app to do most of your banking?

  • Will the bank accept your address?

  • What about fees for deposits, wire transfers, etc.?

I’m thinking most of you need a 100% remote bank because who wants to visit a physical bank? 

These are all important considerations, but not the only ones.

The biggest concern for many is usually the fees. This is why a credit union or online bank is usually a better option. 

The big banks usually charge more fees unless you maintain a high minimum balance. Be careful of these fees and save yourself the $10-$15 just for having an account!

Want a no hidden fees ONLINE business bank account? Look no further. I recommend Bank Novo

Why choose Novo?

No hidden fees No hidden fees

No minimum balance No minimum balance

Human-powered customer support Human-powered customer support

Bank level security Bank level security

All ATM fees reimbursed All ATM fees reimbursed


Otherwise, I recommend going with a bigger bank due to the many services offered. They aren’t always that user-friendly, especially for digital nomads. However, if you ever want to get a business loan, most banks prefer to lend to someone they know and trust (trust = people who bank with them and have a history at their institution). 

Whichever route you take, please make sure the bank you choose checks all your needs. Think about the future as well. Is your plan to grow quickly? Need a loan to help with growth? Will you need to make wire transfers? Deposit cash? Deposit checks? 

Many new entrepreneurs don’t know what they need to be doing. That’s ok. You may have even made some of the above mistakes. That’s in the past. Now, let’s correct it moving forward.

Keeping your finances separate may be difficult at first. But, it will become a habit and second nature in time. Do yourself a favor and separate them from the beginning. You can know that you’re doing it the proper way from the beginning. Plus, your bookkeeping will be easier and you’re less likely to overpay on taxes.

Keeping separate business and personal finances is tough but you got this.

RV Tax Queen

I’m a numbers person—but don’t let that scare you. I’ve been an enrolled agent (EA) since 2014 and a nomadic business owner since 2016. Because I’m a nomad myself, I know exactly how stressful life on the road can be.

Nomad Business Academy

Nomad Business Academy offers mini-courses on everything you need to know to run a nomadic business, from which business entity is right for you (and what a “business entity” even is) to how to navigate self-employment taxes to learning if S Corp is a good fit for you and so much more.



This website is for general information only and is not intended to substitute for obtaining legal, accounting or financial advice. It is not rendering legal, accounting or other professional advice. Presentation of the information on this website is not intended to create a client relationship. For specific tax assistance please consult a tax professional on an individual basis.

While I make every effort to furnish accurate and updated information, I do not guarantee that any information contained in this website is accurate, complete, reliable, current or error-free. I assume no liability or responsibility for any errors or omissions in its content.


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