Many creative entrepreneurs and Etsy shop owners fail to separate their business income and expenses from their personal income and expenses. This is called “co-mingling of funds.” A good way to separate business income and expenses from personal income and expenses is to open a separate business bank account. Be sure to run all business income and expenses through the business bank account. The reason that you want to separate business from personal funds has to do with legal and tax purposes. First, when a business is organized as a limited liability company, corporation, or partnership, that business it is a separate legal entity from its owner or owners and it should have a separate bank account. Second, co-mingling of funds can bring up a lot of negative consequences in case of an IRS audit. On my next post I'll talk more about business income and business expenses.
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