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LawnMonkey
January 23, 2025
Question

Self prop bank transfer to personal account

  • January 23, 2025
  • 1 reply
  • 0 views

I run a self prop landscaping business. No employees.  I have a recurring weekly payment to my personal account and spending.  How do I categorize that?

1 reply

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ElijahStownton
January 23, 2025

In QuickBooks, since you’re running a sole proprietorship, the recurring weekly payments to your account are essentially the owner’s draws. These aren’t considered a business expense but rather a distribution of the business profits to yourself.

 

Here’s how to handle it:

 

1. Go to Chart of Accounts and create an account called Owner’s Draw. Set it as an Equity account. This will track any money you take out for personal use.

 

2. When recording the payments to your personal account, categorize them under Owner’s Draw instead of as a business expense. This ensures they don’t affect your profit and loss statement since it’s not an operational expense.

 

3. Avoid mixing personal and business expenses. Keep personal spending separate from your business transactions. If you need funds for personal use, continue transferring money from the business to your personal account and use the Owner’s Draw to record it. Avoid paying personal expenses directly from the business account to keep clean records.

 

This setup keeps your financials accurate and makes tax season simpler. If you’re unsure about specifics for tax reporting, consulting a CPA or tax advisor is always a good idea.

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    LawnMonkeyAuthor
    January 23, 2025

    Thank you!

     

    I have a second personal bank account that I only use exclusively for child support payments.  I make transfers from my business account to that account as well.  Do I categorize it as an owner draw as well?

     

     

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    ElijahStownton
    January 24, 2025

    Yes, you would categorize those transfers as an Owner’s Draw as well. Since the second personal account is used exclusively for child support payments, and the funds are leaving your business account for personal use, it’s treated the same way as the transfers to your main personal account.

     

    In a sole proprietorship, the business and personal finances are legally the same, so any money you withdraw from the business for personal reasons (whether for personal spending or child support) is not considered a business expense. Instead, it’s simply a distribution of profits.

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