Are you a business owner? Do you have personal and business accounts?

Being a business owner, it’s likely that you’ve come across the question of how to handle your personal and business funds, right?

Well, the simplest answer is to keep them separate.

Not keeping your personal and business accounts separate can create bigger problems down the road especially with the IRS.



Commingling funds is the act of mixing personal and business funds together. Basically, treating your business money as your own personal spending fund.


Which can be fine to an extent. However, it can get tricky when it’s time to file your taxes.


You see, the IRS doesn’t require a business owner to maintain a separate personal and business account. But they do require you to document each business expense for tax deductions.


As there is a pretty fine line between personal and business expenses, you need to be really careful. Especially, with purchasing something or moving money back and forth between accounts.


You don’t want to find yourself in a position of not having enough funds to cover business transactions. AND you definitely don’t want Uncle Sam to raise his eyebrows and think you’re trying to avoid paying taxes.

Also, you never want to make yourself personally liable for any of your corporation’s debts.


You see, under an LLC or a corporation, your personal assets are protected by the “corporate veil”. EXCEPT, having commingled funds would pierce that veil and allow creditors access to your personal assets in a legal dispute, should a business transaction go south.


We definitely want to avoid that at all costs!


So what can you do?



Here’s some tips to help navigate any potential problems:

  • Make sure that you keep separate accounts for your personal expenses and your business expenses with different bank accounts for each one of them.

  • Document every transaction. Don’t wait until the end! Online banking programs make it easier to document each transaction. You can also move money from one account to another. Just remember to put the reason why.

  • Use different credit cards/debit cards when doing transactions related to each one of these accounts. Why? Because every transaction leaves a paper trail. Should you be audited at some point in time, there may be discrepancies between what was purchased/paid by the corporation as opposed to personal use.

  • Create an organized record-keeping system. This will make it easier to identify the tax-deductible expenses you can use to help minimize the amount of taxes owed.


As a business owner, it’s important to know the implications of commingling personal and business funds, as to avoid issues down the road.


Should you find it difficult to figure out what you should do, consult with an accountant. They will help guide you on how best to handle this situation.