Money mingling: five tricks to keeping personal, business finances separate.

• Author: Madison, Rachel
• Position: EntrepreneurEdge

When launching a new small business, intertwining personal and business finances can be tempting. Small business owners live and breathe their business, sometimes even running it out of their homes. Because of so much personal involvement, using business monies to pay for personal expenses, or vice versa, might seem like a good idea, but in reality, co-mingling monies can be a major headache. Follow these tips from industry leaders to keep monies separate and the headache at bay.

1. Set up separate accounts. One of the best things a new small business owner can do is start from the beginning with separate checking and credit card accounts for personal and business expenses. "A lot of times people think because their business is small they can keep it as part of their personal finances, but right off the bat, just set up a separate account," says Kimberly Christensen, CPA and owner of Christensen & Company in St. George.

   That's because using personal money interchangeably with business money can hinder a business owner from actually knowing how well their company is doing. "You don't have a good perspective on how your business is doing if personal expenses are mingled in with business expenses," says Mike Eggleston, CPA and owner of Small Business Accounting & Tax in Spanish Fork.

   In addition, Eggleston says keeping personal and business monies separate is easier if it's done from the beginning. "Just do it. Don't be lazy," he says.

2. Maintain good records. Business owners should understand the importance of keeping good records of all their transactions--whether personal or business related.

   "A lot of times, small businesses aren't sure what to do," Eggleston says. "They come to me and have no records at all. They haven't done something as simple as setting up a spreadsheet on QuickBooks so they have some kind of record. Those records are needed to file income tax returns, and going back and trying to reassemble records from eight months to a year ago--they won't remember what they did back then."

   Keeping expenses separate won't always be easy or clear cut--especially if a vehicle or cell phone is used for both business and personal reasons--but "if you just label everything in your bookkeeping and keep it labeled correctly, you'll always know what you did. It's not always going to be perfect or easy, but you have to do your best," Christensen says.

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3. Keep tax season in mind. A business must be managed separately from...