Why you should keep your business and personal finances separate

When you’re starting out in business The temptation to run your business using your own bank account, or perhaps put some money into your personal credit card, is an easy one to be enticed by. In actuality, we’ve heard of businesses who funded those early days by credit card, or the founder’s redrawing of their mortgage.

Long-term, however, there are many advantages to be gained from keeping your personal finances separate from your business finances. The increase in new sources of financing for small-sized businesses is making it simpler than ever before to separate your finances.

Here are a few advantages of keeping your personal and personal finances separate

1. It may be more efficient in terms of taxation.

From a tax perspective the combination of personal and business financial accounts can be a challenge.

You generally don’t get tax deductions for personal expenses. it’s your business expenses that count.

You could be adding additional compliance costs that aren’t needed if your accountant must divide which tax deductions are tax deductible and which not. It’s therefore important to keep track of receipts and other records.

2. An understanding of business performance

The most important thing to consider when running an enterprise is discern if the business is actually making money.

When you mix your personal belongings with business it usually gives you a false reading as to how the company is performing.

It is important to take time to run your business, and regularly remove yourself from the daily routine to ensure that you keep an an eye on both profit as well as cash flows.

3. It’s an opportunity to set the business up correctly

You must protect the home of your family from creditors. You can do that through your business structure, for example, making use of family trusts or companies that have separate ownership of your businesses.

But you’ll need guidance to set it up properly. Talk to a lawyer, financial advisor or accountant about how to create and protect equity. That advice can save thousands of dollars at in the long run.

Make sure you have the right structure in place before you start your business.

When you’re just starting out in business, be sure to do your homework. This is a substantial investment. Don’t throw your money away simply because you want in order to cut a few dollars in the beginning. Look at the fundamental due diligence, financial, legal and the business itself.

4. Improve your credit score

Separating personal finance from business finance and using it to grow your business will also help in establishing your company’s credit score.

This can be helpful in negotiations with creditors, or when seeking further capital to grow.

In the event that you’re planning to buy an asset a good credit history might be a benefit to you as you could take out loans at lower rates should the need arise.

Ask for advice

With new alternative lenders that specialize in making it easier for small-sized companies to access financing This is the ideal time to explore how to separate your personal and business financials.

We’re able to help clients through the procedure and offer advice on the most suitable products and structure for your business and personal finance.