Start with a dedicated business checking account. This is the foundation. Every dollar your business earns goes into this account. Every business expense comes out of it. Most banks offer business checking with low fees or waive them with minimum balances. The specific bank matters less than having the separation in place.

Get a business credit card and link it to your business account. Use it for all business purchases. This creates automatic documentation and makes expense tracking straightforward. When your bank feed pulls into QuickBooks or other accounting software, everything on that card is business by default. No sorting through mixed transactions trying to remember what was for work.

Pay yourself intentionally. If you’re a sole proprietor, take owner draws from the business account to your personal account on a regular schedule. If you’re an LLC taxed as an S-corp, you’ll pay yourself through payroll. Either way, move money from business to personal deliberately. Don’t just use the business card at the grocery store or pay your mortgage from the business account.

When you slip up, and everyone does occasionally, don’t ignore it. If you use a personal card for a business expense, record it in your books as an expense funded by owner contribution. If you accidentally pay a personal bill from the business account, record it as an owner draw. Monthly bookkeeping catches these quickly so they get recorded correctly instead of creating confusion at year end.

Why does separation matter beyond just keeping things tidy? Three reasons.

First, taxes get simpler. Mixed finances mean hours untangling which transactions were business and which were personal. With separation, your books reflect actual business activity without the noise of personal spending mixed in.

Second, you can actually see how your business is performing. Mixed finances distort your numbers. You might think you’re profitable when personal spending is hiding in business expenses, or think you’re struggling when you’ve actually been subsidizing the business from personal funds.

Third, legal protection. If you’re an LLC or corporation, commingling funds can pierce the corporate veil. The liability protection you set up the entity for might not hold if you’re ever sued and a court sees that you treated business and personal money interchangeably.

The earlier you establish clean separation, the easier everything becomes. If your books are already tangled with mixed transactions, Fresh Ledger can help clean that up and set you up with systems that keep things separate going forward. Prevention is easier than cleanup, but both are fixable.