Business Tips

Separating Your Business from Yourself

As stated in my earlier article, 5 Things You Should Never Do When Starting a Business, you are not your business! This common mistake made by many of the newly self-employed can cause all kinds of issues later on.

When you begin a business, you will want to separate yourself (as an entity) from this business as much as possible, even if you are DBA (Doing-Business-As). This means that your business finances, operations, and policies will be on one end, and you will be on the other. In a sense, the more you begin to think of yourself as “working for your business” or even “an employee of your business who happens to call the shots) the better!

Confused? Here is a step-by-step guide on how to achieve business/self separation in a healthy manner.

Financial Separation

One of the first things you will need to do is open a business account. You can do this at your local bank, where you do your regular banking, or at a different institution. It’s sometimes easier to have both your accounts with the same bank, but if you do, make sure they are separate entities.

While it will vary state-by-state (or by country) you will need to have a Tax ID number for your business before you can open this type of account. To do this, go to your local state department of taxation and revenue, fill out the correct form (which they will provide for you.) If you are hiring employees, you will also need to file for a Federal Tax ID number, at least in the United States.

There are many package deals that banks will offer for new business owners. Make an appointment with an adviser at your bank to go over different options. Generally, starting small (while you get the hang of how the account works) is best. You can always upgrade your account later.

Now, here is how you will manage your business finances:

  1. Make all deposits into your business account when you are paid through your business, or when you see business profit
  2. Make sure that you are taking a certain percentage out of the business account and saving it for taxes
  3. On a certain date each month (you can choose) pay yourself a monthly salary from the business. You can do this once a month by transferring funds from your business account to your checking or savings accounts.
  4. Repeat each month.

This is by far and away the best way to separate your business from yourself financially, if you are running your own business and just getting started. In time, it will get easier to do this, especially if you hire an accountant.

Organizational Separation

It’s easy to get your personal files and business files mixed up. Many of us have a little blue plastic file system with a tab marked “bills” where we haphazardly throw our monthly statements, hoping that we won’t actually have to go through them at any point.

This is fine if you run a business, as long as you don’t care about not being able to find anything and/or getting really confused.

Make sure to have two separate filing systems – one for you, and one for the business. You are going to be keeping track of both, but if something is related to your business dealings in any way, it should go with your business file system. This is extremely important for business receipts, as you’ll be able to write off certain purchases come tax time.

While this will not apply to all businesses, you should also consider doing all your work out of a home office (not in the living room, for example.) At the very least, this will not make you think you are still “at the office” when in fact, you are at home trying to relax!

Finally, you should really name your business. If you don’t have a title, (believe it or not, this sometimes happens to people who find themselves running a business without knowing what they were getting into after selling mattresses online, or giving friends career advice) you should come up with one. The business name will help keep your work dealings separate.



  • Mars Dorian March 20, 2010 at 7:21 am

    Hey, interesting

    but in my opinion you should merge into your brand – if it’s a personal one (wo)man business, that is.
    My mindset is 100% my brand and myself. There’s NO separation whatsoever. And it works out brilliantly for me.


  • Mike March 20, 2010 at 3:51 pm

    When it comes to the financial side of running a business it’s wise to keep separate accounts, and in order to have a healthy work-life balance it helps me to keep my workplace separate from the rest of my life. Possibly not true for everyone, but I ran into a lot of trouble when I was taking vacations and taking my laptop with me… hard to get out of “business mode!”

    As far as branding goes, the idea of marketing yourself as your brand has definitely become huge in recent years (especially with channels like YouTube and Facebook, which is essentially like self-advertising.) I agree with your sentiment here… but I think branding and running a business can be two different entities when it comes to the financial and the “home office.”

    Good thoughts, though!


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