Tips for Entrepreneurs to Keep Their Personal and Businesses Finances Separate
Many younger or newer entrepreneurs make the mistake of not keeping their personal and business finances separate. While not necessarily a critical mistake by any means, it is still a step that should not be forgotten, especially because it can eventually help you in your long-term goals for your business. Additionally, having your personal and business finances separate will help you around tax time in April when you need to make a separate report of all your personal finances and business finances. If you do not keep them separate now, then when tax season comes around you will be doing a lot of unnecessary sorting out of the two.
Business Checking Account
One of the easiest ways young entrepreneurs can get started in separating their finances is to open a separate checking account for their business. If you are in this boat, luckily you do not have to worry so much about what you need to do to get started! Most banks, and probably even the bank where you have your personal account, have incentives for small businesses looking to open an account. Do some shopping around banks and keep in mind that most banks will not charge a fee as long as you maintain a certain balance in your new account.
This part of keeping business and personal finances separate is often unthought of, especially for newer entrepreneurs. If this business of yours is where you will be getting your full income, you might want to consider paying yourself a salary. Depending on what type of business you have (S-Corp, LLC, etc.,) you can either cut yourself a check or take 50% of your profits as wages to you. This step is crucial in helping you when tax season arrives.
This step is a little on the same road as opening a business checking account. One of the most important things you can do is keep business expenses separate from personal expenses. This includes even the most mundane items, like staples or paperclips! Just as long as you are not putting your business into high amounts of debt, using a business credit card to pay for expenses could be a great way to help you keep finances separate.
As you can see, it is important for businesses, no matter how new they are, to keep their finances separate. If you have any other doubts or questions about what you can do to separate your personal finances from your business finances, be sure to speak with a professional to get you started.