Using YNAB for personal and business expenses (as LLC Owner)

Hi Everyone! 

I'm new to YNAB, and any form of properly tracking my finances in a professional, structured way. 
After always just shoving everything I could to my tax accountant, paying them extra for work I didn't want to do, but still finding my personal finances in chaos time and again - it's time to bring this to an end, once and for all. 

So here's my question: 

What's the best way for me to set up my YNAB if the majority of my expenses go via my LLC (the whole point of having one)?

It's just me there (no employees etc) and it's not a big operation but the private and business expenses often get mixed up with different accounts, cards etc. 
Sometimes I pay with personal CC, for something that should be actually a business expense, which then has to be re-transferred. (just one of many chaotic scenarios) 

Anybody here in a similar situation, with having to balance personal and business expenses?
Looking forward to learning from and with you all! 

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  • Typical advice is to use separate budgets because the line between business and personal is very clearly defined. You seem to be intentionally desiring to blur that line, so a combined budget will make that easier. However, you then say this:

    Sea Green Cheetah said:
    Sometimes I pay with personal CC, for something that should be actually a business expense, which then has to be re-transferred

    You can't have it both ways. You either blur the line or keep things separate. Tracking paybacks is illustrative of keeping things separate and is very difficult with a combined budget. Same thing with tracking "owner contributions" and "owner draws". Again, the choice to use a combined budget is intentionally merging things. I currently use this approach for a rental property because expenses will occur regardless of income. I don't track "paybacks".

    I suggest you use separate budgets and track the reimbursements as needed. They are not difficult. I'm sure you already know which expenses are business and personal. It's your call where that line is as far as what would stretch credibility come audit time. Make categories in the appropriate budget and budget accordingly,

    Like 1
  • Hey  @dakinemaui

    Thanks for your reply. Yes, definitely the budgets should be separate for simple accounting reasons. 
    Any business expense (which does in fact blend into my private life, as my private life IS also my business) needs to be paid and accounted for within the company accounts. 
    The mix-up comes from me negligence and personal indifference, which I'm now brining to and end. 

    So, would you create 2 different budgets or simply two different Category groups (eg. Fixed Expenses Private & Fixed Expenses Company) within 1 budget for better overview? 

    Thank you for the tip and link with reimbursements. These need to happen of course by my accountant in the actual accounts, but for YNAB, I'll look into this. 

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      • dakinemaui
      • dakinemaui
      • 6 mths ago
      • 1
      • Reported - view

      Sea Green Cheetah Two separate budgets. A given real-world account should only exist in a single budget.

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    • I have a espy budget for our LLC, as well as separate accounts for personal and business. Definitely recommend going that way. 

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    • Correction: I have a SEPARATE budget for our LLC...

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  • Hi, welcome to YNAB!  

    I used to run an Airbnb short term rental room out of my house before Covid.  I finally started keeping a separate budget and separate accounts for my business vs personal accounts and it was very helpful.  I recommend having totally separate accounts and budgets for both. 

    I also recommend you check out the book "profit first" or just look up some videos on Youtube about it.  I started implementing it just before Covid hit and I stopped renting out my room, but even the few months I did it for were great.  

    Like 1
  • Another thought is that if you keep separate budgets, you can also find out if the business is actually breaking even or making a profit. Yes, there is a crossover depending on what you do but it is important to clearly delineate what is personal and what is business.

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  • I agree with everyone's comments. I would also like to add a congratulations for addressing the main issue...mindset! Now that you are determined to keep business and personal finance separate, you are on the road to success and even though they may not get paid for the extra work, I am sure that your tax accountant will thank you.

    One bit of advice for when you do end up making a business purchase out of your personal account, and you will, we all do at some point; email yourself an expense statement with a copy of the receipt, as if you were an employee requesting a reimbursement. It keeps your books clean if  ever you were to be audited.

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  • Thank you all for this great and valuable advice!! 

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  • I, too, have my business set up as an LLC. I have a separate bank account, and a separate YNAB budget.  All income that comes in TBB is split with percentages going toward Income Taxes, Owner's Draw, reserves, retirement, and expenses.  Annual payments/renewals are set up as goals. It's almost magical how the balances grow, and my reserve account covered monthly expenses in the spring when I was shut down for 4 months. I do a transfer into my personal account for the Owner's Draw at the end of each month, so it's very clear on the reporting.  I have accidentally used the wrong debit card a few times, I just make sure to keep the receipt and make the corresponding transfer to keep it all clean. I definitely recommend the separation! Good luck! 

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    • Natalie Oates oh wow, thank you. 
      So I see you have something like the profit first system set up as well, with the different accounts, right? 

      What would you suggest? Have different accounts at 2 different banks? 
      How often do you do those transfers - or is it all fully automated? 
      I definitely want to get that same clarity in, like you seem to have. 

      I now have my personal and company account at one bank, but as suggested in Profit First, think about getting separate free accounts to move the various balances there. (The accounts are free) 

      What I think of is creating one separate account each account for Profit (5%) / Owner's Pay (30%) / Taxes (10%) / Reserve and Unexpect Costs (10%) / Investment (10%). 
      This leaves 35% for Expenses - might not be enough? 

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      • dakinemaui
      • dakinemaui
      • 6 mths ago
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      • Reported - view

      Sea Green Cheetah I find using an actual account to define purpose (taxes, reserve, etc.) is clumsy in comparison to using categories. That is literally why categories exist in YNAB. 

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    • Sea Green Cheetah 

      You don't need multiple bank accounts. It would be way too confusing and hard to keep up with. 

      I have my personal banking at a credit union (one account), and my business at a local bank (one account) - but only because the CU doesn't offer business banking; otherwise I would have just them at the same bank. The only thing that moves between the two is my pay (Owner's Draw), and I just make a manual electronic transfer at the end of the month. 

      What works for me is: I automatically allocate 30% into my Taxes category, so it is there when it is time to pay quarterly taxes. I put 30% into an Owner's Draw category, which I pay myself on the last day of the month. Then I fund 10% into a Reserve category (this serves as my emergency fund), and 10% into a Retirement category (which eventually gets transferred to a retirement fund).  Then I use the last 20% to fund my expenses - I have them listed in order of priority and mine are minimal. I do have expense categories for "non-regular" items as well, like continuing education, clothing - I fund them when I can. 20% may not be enough for you if you have more expenses, but that's the number that works well enough for me. 

      I added separate categories for anything Covid-related; the eidl grant, PPP loan, etc so that it's all tracked separately. Now I just have to pull that report and will have what I need to apply for forgiveness.  

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  • I'm a little late to this party, but I will toss in my two cents.

    I've been running a business since 2013, which is close to the time that I started YNAB, and it keeps me sane to keep separate budgets for my business and my personal expenses (and my BF's personal expenses as well).

    Here are a few things that I do:
    - Absolutely keep separate checking accounts (and probably savings accounts) as well as credit cards for your personal and business. That makes it SO much easier to keep track of everything. (I don't think you need to keep them at different banks, as you commented above. That would drive me crazier trying to keep up with it)

    - Keep everything IN the business that you can. This keeps it much cleaner and keeps things neat. Don't forget things like office supplies, your phone(s), internet, etc. All of those things can be directly expensed in the business. Even things like the power bill and portions of your rent/mortgage can be expensed (as can things like massages, manicures, yoga, a physical trainer, classes and courses, computers and equipment, etc, etc, etc depending on your business and the demands it has). Check with your accountant to find out what proportions are appropriate for your business. Doing this may make what you "pay" yourself less on paper, but it will allow you to deduct as much as possible by keeping it within the business to start with.

    - Depending on your business, you may be able to deduct miles or gas/maintenance for your vehicle. Check with your accountant to learn about what makes the most sense for your situation.

    Once you've got things set up to flow like this, then you can work out how and what you pay yourself. Because the business is covering some of the daily bills (like the phone, and/or power bill, etc), then paying yourself a smaller amount is totally fine.

    I also maintain a separate spreadsheet for my financial tracking that gets reported to my accountant annually. I found that I wasn't able to organize YNAB the same way I wanted the financial reporting to be done. YNAB is great for future planning. It's not so great for past tracking for the business. I don't mind organizing spreadsheets once a month (still have to catch up on November!), and I have built a fairly sophisticated spreadsheet that crunches a lot of numbers for me, which helps. It also makes it SUPER easy for my accountant at the end of the year!

    If you ever want to chat business vs personal stuff, and strategy, feel free to shoot me a message. I'm happy to chat about how I have my things organized and the stuff I've learned in the past few years.

    Like 2
  • Hey farfromtheusual  this is great stuff. thank you. yes, I'd love to chat a little more! 
    I'm currently working on tidying up the past (only 1 year) and to then keep things clean and structured from  here on. 
    I've (tried to) built a spreadsheet template as well, maybe you can share a few thoughts on this? 
    USing excel sheets has never been my greatest strength... 

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  • I think a spreadsheet is a fair bit of effort for no reward over just using YNAB. 

    Through the use of Rule 2 and prioritization, all I need to look at is the current month. YNAB's take on the budget template is here:

    https://docs.youneedabudget.com/article/915-budget-template

    When I was paid multiple times per month, I applied Rule 2 on a paycheck basis (my recommendation until this month is completely funded by last months income). All the per-check contributions to all categories must fit within my income level. The budgeting (allocation) itself is actually trivial.

    The only hard part is deciding on relative priorities between categories. I don't make enough to afford everything I want. Over time, my budget has become an expression of my priorities, with the things that are more important to me getting funded.

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