In the early days of your business maybe you were using your personal bank account and a personal credit card for business transactions.  By now you’ve should have opened a separate bank account and dedicated one credit card for business use. If you’re working as a sole proprietor it means both the bank account and credit card are likely personal not business accounts.  That’s fine as it is the segregation that’s important.

If you still co-mingle personal and professional transactions, here are a few reasons not to:

• The IRS. Improper segregation and record keeping can cause the IRS to disallow an expense as pertaining to business. After all they would like you to report higher income and pay higher taxes.
• Evaluating Business Results. It is hard to evaluate how your business is doing if business and personal expenses have been mixed together.  You need to be able to answer “what is the cost of doing business”.  At some point financial statements will be needed and they need to reflect only business transactions.
• Infrastructure for Growth. I am assuming you would like to grow your business.  The early segregation is the beginning of building an infrastructure that eventually results in the policies and procedures necessary to support growth.
• Protecting Personal & Business Assets. Failure to segregate personal and business transactions means personal assets could serve as collateral for business debt and/or business assets could serve as collateral for personal debt. This increases your risks if problems develop in either area.
• Repaying Personal Loans. If you have loaned your business funds to operate proper documentation and segregation will help insure you get repaid and the repayment is treated correctly for tax purposes.  Depending on the business form you choose, your ability to deduct losses may also be impacted.
• Future Borrowing. Particularly today, any personal problems with credit and debt impacts your ability to get credit for the business.  This isn’t a segregation issue so much as it is something to be very aware of.

If you have recently started a business or are thinking about it, keeping the personal and business separate is critical for future success.  This is not the place to try and save money by using one bank account and credit card for both.

With the unemployment rate being what it is entrepreneurship just maybe the only answer for your teen finding work this summer.  Sue Shellenbarger discussed a few possible business ideas for teens in her recent Wall Street Journal article Cupcakes and Cattle Breeding: Teens Turn to Summer Start-ups.

I did some research on my own and came up with the following selection of organizations encouraging teen entrepreneurship:

• National Foundation for Teaching Entrepreneurship
• Junior Achievement
• Initiative for a Competitive Inner City, or ICIC- the Growing Up CEO program
• Teen Business Link, the SBA site for teenagers interested in starting a business
• Independent Means, the leading provider of financial education products and programs in the United States.
• Also see Entrepreneur magazine, Teen Business Sites for more organizations.

Starting a business at a young age is a priceless (no pun intended!) experience. I encourage you to support your teenager and be prepared to learn along the way as well.

Let us know how it goes.