![]() ![]() Plus, if you don't use a separate business account, all the business transactions will be mixed with your personal transactions. ![]() This is the main problem that sole proprietors go through, as there isn't always a clear line between the two. If you co-mingle your personal assets with your business assets, you risk going through a variety of legal issues, along with tax complications.įor example, if someone files a lawsuit against you, then your personal assets (i.e., your car and your home) could be at risk. Why Should I Separate My Business and Personal Expenses? This is usually the case for S-corporations, C-corporations, and LLCs. However, if your small business is taxed as a corporation, then you have to pay income tax, and self-employment tax. For example, if you file your business revenue through your personal taxes, as pass-through entities, then you need to pay personal income tax and property tax. That being said, depending on how you want your small business to be taxed, you also need to pay different taxes. Moreover, if you are the owner of a corporation paying business taxes, you may be able to write off more taxes than you would as a pass-through entity. Personal taxes and business taxes have different deadlines, making it easier for you to keep track of your expenses. However, corporations or LLCs that choose to be taxed as a corporation can keep their business finances separate in the eyes of the IRS, enjoying limited liability. How you pay those personal and business taxes will depend on what kind of structure you have.įor the most part, owners of pass-through entities (i.e., sole proprietorships, partnerships, or some LLCs) will file their personal taxes together with their business taxes. That being said, if you are the owner of other business structures, your business will also have to pay taxes. ![]() Differences Between Personal and Business TaxesĪs a person, you owe taxes for any income that you may make. ![]()
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