Keeping Business and Personal Finances Separate
You’ve taken the leap of faith and finally decided to turn your passion into profit. You’ve spent countless hours creating your brand that sets you apart from your competitors and met with your trusted team of professionals to help your startup business hit the ground running. You’re ready for that cash to start flowing! Wait, but where is it going to flow? Your personal account? Negative. While you, the owner, are your business, your finances need to be kept separate.
As bookkeepers, it is far too often we see business owner’s personal and business finances intertwined. While your personal credit score may have landed you that business loan, it is imperative that from here on out you create a clear boundary between your personal and business finances and maintain records of where your company’s money is going. Not only is it the law, but it will make your life and your CPA’s life one hundred times easier come tax time. As your business grows, this is going to get more difficult, but here are some ways to alleviate the headache.
Open a business checking account
This should be number one on your list. Do your research on what kind of business plans banks offer and go for the one that seems right for your business. We suggest opening a business checking account with the same bank you use for your personal finances. This will come in handy should you get in a bind and need to transfer money from one account to the other. Your CPA will also thank you. Trying to wrap your head around which transactions are personal and which are business related is no fun.
Get a business credit card
This will help build your businesses line of credit which will come in handy with vendors and such in the long run. And again, it will help with your record keeping and come in handy should you ever get audited.
Write yourself a paycheck
You’re your own boss. Add yourself to your company’s payroll and treat your pay check as you would if you were working for somebody else. If you’re running out of funds, tighten the belt until the next payday. Your business checking account should be off limits for personal use.
Establish your business structure
Sit down with your trusted team of advisors and decide whether to structure your business as an Corporation or LLC. Treating your business as its own entity will come in handy should things go south and your business ends up being sued. This protects you, personally, from any business debts and liabilities.
Track your expenses
Last, but certainly not least, track your expenses. Make sure you have a clear record of all purchases made with your business checking account. Setting up an accounting software such as QuickBooks is a necessity. If you need to buy business and personal items at the same time, ring them up as separate transactions.
At times separating your finances can seem like a pain, but it is worth it in the long run. You do not want to find yourself in an audit with a mess of your personal and business finances and you always want to keep your accountant/bookkeeper in the loop. We want your business to thrive and will do all that we can to ensure success. At Devine Consulting, your success is our business. Give us a call at (281) 545-4000 for a free quote, or you can tell us about your business financials here.