Like most other small business owners, you probably used your own savings to launch your company and get it up on its feet. While there's nothing wrong with this, it's very important that you treat your company as a separate entity from yourself. This means implementing a boundary between business and private finances, a move that's crucial in facilitating tactical money management.
It's much easier to identify business expenses when your finances are separated. This translates to less time spent combing through bank statements when it's time to file your tax returns. On the other hand, having your business and personal funds intertwined could cost you in more ways than one. Besides the time you'll waste trying to sort out the mess, there's also the risk of incurring the wrath of the taxman.
You already know how important it is to maintain a professional image out there. What you might not be aware of is that merging all your finances under the same umbrella won't help this cause. Having your customers make payments to your personal accounts will make them start doubting your professionalism. For them to start taking you seriously, there has to be a clear boundary between you and your firm.
If your company is registered as an LLC or a corporation, merging your accounts effectively negates the personal liability protection you sought under the law. Creditors will have easy access to your personal assets when looking to satisfy their claims. What's worse, courts will ignore your pleas when you turn to them for help.
Your ability to prove that your enterprise doesn't rely on your personal resources will be of utmost importance when applying for business loans. Lenders will also want to see your company's credit history, but this will be nonexistent if there's nothing to separate your personal and business income. You'll only have yourself to blame if this ends up limiting your borrowing power.
In an ideal scenario, a quick scan at your bank statements is all you'd need to figure out how your business is fairing at any time. This is easier said than done, but what's indisputable is the fact that it'd take at least a week to do the same if your finances are merged. Remember that it's your responsibility to spearhead decision making and maintain forward progress. Knowing that you don't have any personal transactions interfering with your accounts will not only make this easier, but also lessen the workload for your accounting department.
Detaching your financial life from that of your firm will minimize the temptation to use personal funds to sort out business expenses. You'll also be able to increase your earnings as a shareholder without compromising the solvency of your company. It's not unusual for otherwise profitable ventures to be run into the ground simply because their shareholders adopted the wrong mindset with regards to finances. The only way to avoid this possibility is to run your business as an independent entity.
The fact that you're a small business owner means you probably have more on your plate than you can comfortably handle. Obviously, opening up a separate bank account for your business will mean more administrative work for you. As true as that may be, it's the only way to avoid the potential pitfalls of running your finances via the same account.
It's much easier to identify business expenses when your finances are separated. This translates to less time spent combing through bank statements when it's time to file your tax returns. On the other hand, having your business and personal funds intertwined could cost you in more ways than one. Besides the time you'll waste trying to sort out the mess, there's also the risk of incurring the wrath of the taxman.
You already know how important it is to maintain a professional image out there. What you might not be aware of is that merging all your finances under the same umbrella won't help this cause. Having your customers make payments to your personal accounts will make them start doubting your professionalism. For them to start taking you seriously, there has to be a clear boundary between you and your firm.
If your company is registered as an LLC or a corporation, merging your accounts effectively negates the personal liability protection you sought under the law. Creditors will have easy access to your personal assets when looking to satisfy their claims. What's worse, courts will ignore your pleas when you turn to them for help.
Your ability to prove that your enterprise doesn't rely on your personal resources will be of utmost importance when applying for business loans. Lenders will also want to see your company's credit history, but this will be nonexistent if there's nothing to separate your personal and business income. You'll only have yourself to blame if this ends up limiting your borrowing power.
In an ideal scenario, a quick scan at your bank statements is all you'd need to figure out how your business is fairing at any time. This is easier said than done, but what's indisputable is the fact that it'd take at least a week to do the same if your finances are merged. Remember that it's your responsibility to spearhead decision making and maintain forward progress. Knowing that you don't have any personal transactions interfering with your accounts will not only make this easier, but also lessen the workload for your accounting department.
Detaching your financial life from that of your firm will minimize the temptation to use personal funds to sort out business expenses. You'll also be able to increase your earnings as a shareholder without compromising the solvency of your company. It's not unusual for otherwise profitable ventures to be run into the ground simply because their shareholders adopted the wrong mindset with regards to finances. The only way to avoid this possibility is to run your business as an independent entity.
The fact that you're a small business owner means you probably have more on your plate than you can comfortably handle. Obviously, opening up a separate bank account for your business will mean more administrative work for you. As true as that may be, it's the only way to avoid the potential pitfalls of running your finances via the same account.
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