How to Mix Personal With Business Accounting

Many people with small or home-based businesses freely mix personal and business accounting. They may use a single checkbook to buy groceries, pay the mortgage -- and purchase supplies for their business. They may use their cell phone for business and personal use and pay the cell phone bill out of the family checking account as well. Some separate bookkeeping is often necessary, but the Internal Revenue Service does recognize one business structure that is perfect for mixing personal and business accounting.

Instructions

1

Conduct your business as a sole proprietor. The IRS describes a sole proprietor as someone who owns and operates an unincorporated business by herself or himself. The IRS reports that the business structure is common and freely allows people to mix personal and business accounting. No special forms, licenses or applications are necessary for a sole proprietorship. You're free to immediately begin business as a sole proprietor and to mix personal and business accounting.

2

Maintain accurate records of all expenses for tax purposes. Sole proprietors use standard personal federal income tax forms to deduct business expenses or report earnings. However, proper record keeping is necessary to separate personal expenses from business expenses.

3

Review your personal and business accounting situation regularly -- perhaps annually -- with an accountant or attorney. A major drawback to sole professorships is that you assume full liability for the business. That means all of your personal assets are at risk if someone files a lawsuit against you for actions by your business. A person selling arts and crafts probably does not have to worry about liability issues. But a roofer or electrical contractor may need a different business structure that does not mix personal and business accounting while offering significant personal liability protection.