Tips for Separating Your Personal and Business Finances
One of the first things on your to-do list when you start up a company is to separate your personal finances from your business finances. This will help you stay organized as you handle your bookkeeping, make it easier for you to do your taxes, and ensure that your company is legally protected if you have established an S-Corp or LLC. You should accomplish this separation as soon as your business starts making money. Here are some strategies that can assist you in separating personal and business finances.
Keep Checking Accounts Separate
You are asking for confusion if you keep business and personal funds in the same checking account. Instead, have a personal checking account for your own financial needs and a business checking account for your company. This allows you to deposit business profits and handle business expenses completely apart from your own personal financial activities. If your company cannot initially meet the requirements for a business checking account, then open a second personal account and use it only for your business.
Have Specific Savings for Your Business
Your company should also have a separate savings account so that in the event of emergencies you can draw on that instead of on your personal savings. To build up savings for your business, arrange for automatic transfers of a percentage of your profits to the savings account.
Obtain a Business Credit Card
A business credit card is not only an additional organizational step in keeping your personal and business finances separate, but it also helps you to build your company’s business credit score. As you pay for your business expenses, your company may even be able to earn rewards that can further assist with your financial situation.
Receive a Salary
Once you have set up an LLC or S-Corp, as a business owner you can start paying yourself a salary. This makes separating personal and business finances and creating personal and business budgets much easier.
For more advice on separating business finances from personal finances, contact DrawBridge Capital.