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How to Separate Business & Personal Finances

  May 12, 2020  |    #Make Money

Separate Business & Personal Finances

Are you using your personal checking account for your side hustle? Here’s the very important reasons to separate business and personal finances

How to separate business and personal finances

If you’re just starting a microbusiness, it may seem like no big deal to commingle your business and personal finances. But Manny Cosme contends that whether you run a small Etsy store or you’re building the next Fortune 500 company, it’s important to keep your business and personal finances separate.

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 more than 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 important 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

  1. Sole proprietorship or partnership
  2. LLC
  3. 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

The minute that you do anything with the intention of making money from it, you have created a business. - Manny Cosme of CFO Services GroupClick To Tweet

Connect with Manny

Resources to help keep your business and personal finances separate

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The 5-step plan to pay off credit card debt faster and cheaper starts with this . . .