02/16/2023: Keeping your Personal and Business Finances Separate
Did you know that keeping your personal and business finances separate is a critical step for any small business owner?
As a small business owner, it can be tempting to mix your personal and business finances, especially if you’re just getting started. However, failing to keep these two areas of your life separate can lead to a host of problems down the line. Here are just a few reasons why separating your personal and business finances is so important:
Legal protection: Structuring your business as a separate legal entity (such as an LLC or corporation) can help protect your personal assets from business liabilities. But to maintain this separation, you must keep your personal and business finances separate.
Tax purposes: Keeping your personal and business finances separate makes it easier to track your business expenses, which can be helpful come tax time. It also helps you avoid comingling funds, which can be a red flag for the IRS.
Financial clarity: Separating your personal and business finances can help you understand the financial health of your business more clearly. By tracking your business income and expenses separately, you’ll have a better idea of your company’s profitability and cash flow.
Professionalism: Keeping your personal and business finances separate can also help you appear more professional to potential investors, partners, and customers.
In short, keeping your personal and business finances separate is a critical step for any small business owner. If you haven’t already, now is the time to set up separate bank accounts and credit cards for your business, and to start tracking your business income and expenses separately. Doing so can help protect you legally, make tax time easier, provide financial clarity, and make you look more professional in the eyes of potential partners and customers.
Please consult your tax professional for more information.