Mixing personal and business finances is one of the most common mistakes I see with small businesses. The mess it cost can be catastrophic at tax time, or even when your company goes to apply for a loan of sorts.
This may be you and you are not sure how to make things work out correctly or even how to take a step in the right direction. Here are a few tips to help you get started.
Create a Business Checking Account
This should be your first step when starting a new business, and you should get into the habit of depositing income here and paying bills from this account as well. If there is ever any question as to whether you are running a hobby or a business, the IRS will first look to see if you’ve opened a separate account, which will help them decide whether to grant you that all-important distinction, so you want to make things as simple and clear as possible for yourself from the beginning.
Open a Business Credit Card
If you are a new business owner, it can be difficult to get approved for a credit card, but apply anyways, it’s no use wondering “if”. And if you get denied, continue apply especially as your business grows. Little secret about doing this is that business credit cards are the only credit cards on which interest accrued is deductible as a business expense.
Pay Yourself a Salary
Writing a check from your business checking account to yourself for the same amount each month will help you maintain a sustainable business budget. It can be easy to let money slide around between personal and business accounts but paying yourself a set salary will help maintain the necessary boundaries.
Maintaining clear lines between your business and personal expenses doesn’t need to be challenging. Setting up a clear distinction between your personal and business finances, and consistently keeping them separate, is fundamental to your success. If you are a new business owner, start things right from the outset. If you have been in business a while, take a day or two to get things set up for the long haul. It will save you tons of headache and make it easier for you to become successful in your business.
Now that you have a starting point, let’s get going!
Share below other ways that you may find helpful in separating your personal from business expenses.
To Your Success!