Separate Business & Personal Finances
Are you using your checking account for your side hustle? Here are the very important reasons to separate business and personal finances
How to separate business and personal finances
If you’re starting a business, blending your business and personal finances may seem like no big deal. But Manny Cosme contends that whether you run a small Etsy store or are building the next Fortune 500 company, keeping your business and personal finances separate is essential.
Hear all about why you should separate business and personal finances on Queer Money®:
How to separate business and personal finances:
Manny is the President and CEO of CFO Services Group, an accounting firm based in Washington, DC. He has over 20 years of experience in financial management, accounting and administration, working almost exclusively with small businesses to get their finances back on track. Manny served as the Vice President of Finance and Administration for the US Hispanic Chamber of Commerce for five years before founding CFO Services Group in 2012.
On this episode of Queer Money®, Manny joins us to explain why it’s essential to keep our business and personal finances separate, discussing the legal, tax and management ramifications of comingling our money. He shares the distinctions among a sole proprietorship, an LLC and a corporation, encouraging us to open a separate bank account for our business, no matter its structure. Listen in for Manny’s insight on the benefits of getting an EIN (whether or not it’s required) and learn the easiest way to start separating your business and personal finances—today!
Topics covered on why you should separate business and personal finances
Why we should keep our business and personal finances separate
- Legal and tax reasons
- Better management decisions
The easiest way to separate our business and personal funds
- Open a separate bank account for business
- Carry separate personal and business debit/credit cards
When we should start separating our business and personal finances
- Minute set the intention to make money
- Important for IRS guidelines
The most common mistakes entrepreneurs make around separating funds
- Comingling business and personal finances in the early stages
- Pay business credit card from a personal account (or vice versa)
- Buy supplies with money from a personal account
The adverse effects of commingling business and personal funds
- No legal separation between you + business (personal assets at risk)
- More difficult to do the paperwork for taxes, miss out on deductions
- Don’t know how much money flowing in and out of business
The benefits of getting an employee identification number (EIN)
- Functions as a kind of social security number for business
- Protects the entrepreneur’s confidentiality
The different types of business structures
- Sole proprietorship or partnership
- LLC
- Corporation
What information the bank needs when we set up a business account
- Social security number only for a sole proprietorship
- EIN, articles of formation and operating agreement for LLC
- EIN, articles of incorporation and bylaws for a corporation
The benefits of joining a local LGBTQ chamber of commerce
- The camaraderie with other business owners
- Opportunity to give back to the community