How to Separate Business and Personal Finances in QuickBooks Online
How to Separate Business and Personal Finances in QuickBooks Online
One of the most common mistakes small business owners make is mixing personal and business finances. While it might seem harmless early on, this can cause serious issues — from messy tax filings to inaccurate financial statements.
Thankfully, QuickBooks Online makes it simple to keep your business and personal transactions separate. In this guide, we’ll show you how to do it right — step by step — and how Lionhood Financial can help you stay compliant, organized, and confident in your numbers.
💡 Why Separating Finances Matters
Keeping your personal and business finances separate isn’t just good practice — it’s essential for:
- Accurate bookkeeping — See exactly how your business is performing.
- Tax compliance — Avoid IRS red flags and simplify deductions.
- Legal protection — Strengthen your business’s legal identity and liability protection.
- Financial clarity — Know where your money is going and make better decisions.
When your transactions are mixed, your books become harder to manage — and your accountant or bookkeeper spends more time (and your money) cleaning things up.
💼 Step-by-Step: How to Separate Business and Personal Finances in QuickBooks Online
Step 1: Use Separate Bank Accounts
Open a dedicated business checking account and business credit card.
Never use your personal accounts for business transactions — even small ones.
Once opened, connect your business accounts directly to QuickBooks Online under Banking → Link Account. This ensures that only business transactions appear in your books.
Step 2: Categorize Transactions Correctly
Go to the Transactions tab in QuickBooks Online.
Here’s how to manage entries:
- Business transactions: Categorize under appropriate expense types (e.g., “Office Supplies,” “Marketing,” “Software Subscriptions”).
- Personal transactions: Mark as “Personal Expense” or “Owner’s Draw” to exclude them from business profit and loss reports.
Lionhood Financial’s QuickBooks coaching can help you learn how to set up rules that automatically categorize recurring transactions — saving time and preventing mistakes.
Step 3: Review and Reconcile Regularly
Every month, reconcile your QuickBooks accounts to match your bank statements.
This ensures:
- No personal expenses slip into your business books
- All legitimate business expenses are accounted for
- Your balance sheet stays accurate
Lionhood Financial offers monthly reconciliation services to keep your reports audit-ready and your finances stress-free.
Step 4: Set Up an Owner’s Draw or Salary
If you’re a sole proprietor or single-member LLC, pay yourself using an Owner’s Draw.
If your business is incorporated (S-Corp, C-Corp), set yourself up as an employee and pay a regular salary.
This step formalizes how money moves between you and the business — making your books cleaner and easier to manage come tax season.
Step 5: Avoid Using Personal Cards for Business Purchases
Even in emergencies, avoid using personal cards for business expenses.
If you must, log it in QuickBooks as a “Business Expense Paid Personally” — and reimburse yourself later through the business account.
This keeps a clear paper trail for deductions and audit defense.
⚙️ Pro Tips for Staying Organized
- Use QuickBooks Tags to track mixed transactions until you sort them.
- Review transactions weekly to prevent errors from snowballing.
- Schedule automatic reports to stay on top of your spending patterns.
- Hire a financial coach or bookkeeper to maintain accountability and structure.
🦁 How Lionhood Financial Can Help
At Lionhood Financial, we help entrepreneurs and small businesses simplify bookkeeping through:
- QuickBooks setup and cleanup
- Transaction categorization and automation
- Monthly financial reporting and coaching
- Personalized guidance to help you move from financial confusion to clarity
Our goal is to help you build not just a business — but a foundation for generational wealth.
🧠 Final Thoughts
Separating personal and business finances isn’t just about organization — it’s about ownership and responsibility.
It’s the first step toward thinking like a CEO and treating your business like an asset.
If you’re unsure where to start or your QuickBooks is already mixed up, Lionhood Financial can help you clean it up fast — and set you up for lasting success.
👉 Get Started with QuickBooks Online Today
Start organizing your business finances the right way with QuickBooks:
Try QuickBooks Online with Lionhood Financial’s Referral Link