HOPE BSG Personal Services
The separation between your personal financial status and your business financial status can be tricky for small businesses, especially when you ARE the business. Generally speaking, experts recommend having a clear distinction between your personal and business finances. While we are able to provide funding solutions for your business without the use of your personal SSN, having a strong personal profile is advantageous for you and for your business. If you would like to know how improving your personal profile is beneficial for your business complete both the personal and business assessment.
According to https://www.fortunebuilders.com, here are some reasons to separate your personal and business finances.
Your Professional Image:
Having two separate accounts rather than using the same for both business and private purposes makes you look more serious, including helping to establish your business identity. Investors should apply for credit cards and checks in their business name, which will help to draw a clear line between personal and business expenses.
One of the major reasons to separate your personal and business finances is for tax purposes. The ability to take advantage of tax deductions, including writing off business expenses, is a huge reason many business owners choose to split their personal and business finances. Keeping accurate records of personal and business expenses is vital when running a business, as this will not only help save time but a significant amount of stress as well. Keeping good books of expenditures can also assist in the event of an IRS audit. If your finances are merged, this will more than likely result in the IRS auditing both your business and your personal records.
Another important reason to detach your personal and business finances is business credit. The ability to obtain working capital for your business is vital to grow it, and business credit will be mandatory to secure larger business loans. Having your personal and business income blended together makes it more difficult to provide your business income to banking agencies, therefore making it more difficult to establish your business credit.
Maintain Separate Accounts:
The ability to distinguish between personal and business finances is critically important. Creating an individual account for your business will help to tell the difference between personal and business expenses, as well as assist your case if the IRS ever questions the legitimacy of your business. Having separate accounts also doesn’t hurt the credibility for your business identity.
Determine How To Structure Your Business:
Establishing a legal structure for your business is far and away the most important step you can take in separating your finances. Whether sole proprietor, corporation or forming a real estate LLC, the legal structure of your business will basically dictate everything from your risk and liability, to how the IRS will retrieve your business taxes. Get Started Here.
Pay Yourself A Salary:
Another tip for keeping personal and business finances separated is by paying yourself. Dishing out a salary can help business owners isolate the line between business and personal profits, instead of haphazardly pulling money from their business. Providing yourself with a regular paycheck will not only better the chances of your business succeeding, but keeping you on your personal budget.
Track Shared Expenses:
The best way to steer clear from being audited is to track shared expenses. Separating receipts for your business expenses is vitally important when running a business, as co-mingling has the potential for dire tax consequences — which no one wants. The most efficient way to track expenses is to use separate credit cards. For business expenditures use your business credit card, while personal expenses should be taken care of through your personal finances.
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