Here's why you need to keep your personal and business finances separate

If you’re beginning to establish your business The temptation to run your business using your own bank account, or perhaps use your credit card at home, is an easy one to give in to. In actuality, we’ve seen businesses funded in during the beginning using a credit card, or by the founder’s redrawing their mortgage.

In the long term, however, there are many benefits to be gained from maintaining your finances separate from your business finances. The proliferation of new funding sources for small businesses makes it much easier than ever before to separate your financials.

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

1. It can be more tax efficient

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

Taxes generally do not allow deductions on personal expenses, it’s only your business expenses.

There’s a risk of adding unnecessary compliance costs if your accountant needs to divide the tax-deductible items and what’s not. Therefore, it’s essential to keep receipts and documents.

2. A better understanding of company performance

The key thing for running any business successfully is be able to determine if the company is actually making money.

If you combine personal belongings with business it often gives you incorrect information about what the business’s performance is.

It is crucial to take time to manage your company, and frequently step back from the day-to-day to keep an focus on profit as well as cash flows.

3. This is a chance to get your business up properly

It is essential to safeguard the home of your family from the wrath of creditors. You can do this through your business structure, for example, using trusts for family members or corporations to separate ownership of your business entities.

But you’ll need guidance for setting it up correctly. Talk to a lawyer, financial advisor or accountant about the best way to create and protect equity. It may save you thousands of dollars at in the long run.

You must ensure that the structure is in place before you begin your business.

When you’re starting your own business, you should not skimp on your homework. It’s a major investment. It is not a good idea to dump your life savings down the toilet because you wanted in order to cut a few bucks when you first started. Consider the basic due diligence as well as the legal, financial as well as the business itself.

4. Build your credit score

Separating personal finances from business finances and using it to grow your business will aid in building your company’s credit score.

This is helpful when you’re negotiating with creditors or looking for more capital to grow.

In the event that you’re looking to purchase an asset having a credit score that is good could be a benefit to you as you could take out loans at lower rates whenever the need arises.

Get help

With the introduction of alternative lenders that specialize in making it easier for small businesses to obtain finance This is the ideal opportunity to think about how you can decouple your personal and business finances.

We can help on the way, and help you choose the most suitable products and structure for your company and personal finance.