Keeping Finances Separate Ensures Less of a Money Mess

Author: Keith Huggett

If you’re starting a business, it’s your money. So who cares if your personal and business finances are intermingled?

It’s simple: separating your finances is the business-like thing to do, and it helps protect your personal assets. It also shows you’re mature and savvy enough to turn starting a business into success.

Why?

• Mixing personal and business finances can create confusion at tax time. You’ll risk missed tax savings, and it will cost more to prepare your taxes.
• If your business grows and you want to bring in partners or investors, you cannot have “fuzzy” finances.
• If you and your business are indistinguishable, you could be liable if the business is sued or you can’t repay a loan.

What should you do?

• Keep everything separate, including bank accounts.
• It’s tempting to leverage your home or investments when starting a business. Don’t do it. Positive thinking is good, but if things don’t work out you could easily lose those personal assets.
• Don’t use your personal credit cards, either, for starting a business or ongoing expenses. Get a separate business card and use it only for related expenses.
• Don’t pay personal bills with business funds. Pay yourself instead – not a whopping salary, but enough to support you and still leave as much money as possible in the business to keep it going and growing.
• It can also be tempting to reward yourself after a few strong months by taking a chunk of cash from your business to make a large personal purchase, such as a car. Don’t do that either. Revenue could drop, and your young business needs all the capital it can get.

Establishing a solid foundation when starting a business will pay huge dividends down the road. Since finances are the “bottom line” of every enterprise, consulting one of our professional experts at The Tax Office Inc. could be your smartest startup move. We’re experienced in working with new businesses, and when you contact us, we can give you the advice and support you need to get your new business off to a great start.