True story. A client came to us to get his books cleaned up for a loan application. He was confident it would be straightforward. "My business is pretty simple," he said.
Then we opened his bank statements.
His personal checking account had business deposits mixed in with his paycheck from a side job. His business credit card had family vacation charges on it. He had Venmo transactions going both directions with no clear purpose. And his wife's Amazon account was linked to the business card.
It took us 60 hours to untangle. At our rates, that cleanup cost more than hiring a bookkeeper for the entire year would have.
Why This Matters More Than You Think
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Legal Protection
If you are an LLC or corporation, mixing personal and business funds can pierce the corporate veil. That means a court can ignore your business entity and hold you personally liable for business debts. Your LLC only protects you if you treat it like a separate entity.#
Tax Accuracy
Mixed finances mean missed deductions. We routinely find $5,000-$15,000 in legitimate business deductions that owners miss because they cannot identify which expenses were personal and which were business.#
Loan and Financing Readiness
Every lender will ask for clean financial statements. If your books are a mess of mixed transactions, you will either not get approved or you will pay for an expensive cleanup to become presentable.#
Audit Protection
If the IRS audits your business, commingled funds make everything look suspicious. Clean separation shows the IRS you run a legitimate business with proper controls.The 30-Day Fix
If your finances are currently mixed, here is how to fix it in one month:
Week 1: Open a dedicated business checking account, a business savings account for taxes, and get a business credit card.
Week 2: Move all recurring business charges to the new accounts. Set up your payroll or owner's draw to come from the business account to your personal account.
Week 3: Connect the new business accounts to your accounting software. Start categorizing as you go.
Week 4: Establish your regular pay schedule. Document the amount and frequency of owner's draws or salary.
The Rules Going Forward
These are simple but non-negotiable:
Business expenses go on business accounts. Always. No exceptions for convenience.
Pay yourself a consistent, documented amount. Whether it is a salary (S-Corp) or an owner's draw (LLC/sole prop), make it regular and trackable.
Never use business funds for personal expenses. Not even temporarily. Not even if you plan to pay it back.
Document every transfer between business and personal. Every single one.
One Month of Effort, Permanent Clarity
Separating your finances is a one-time project that pays dividends forever. Cleaner taxes. Better financial visibility. Stronger legal protection. And an accountant who does not cringe when they open your file.