Why you should keep your personal and business finances apart

When you’re first starting out in business it’s easy to fall prey to operating through your personal financial account (or maybe bang some inventory on your credit card at home, is easy to be enticed by. We’ve all heard of businesses who funded the beginning of their business using a credit card or the business’s founders redrawing funds from their mortgage.

Over the long-term, however there are many benefits to be gained by taking care to keep your private finances separate from your business finances. The rise of new sources of capital for small businesses has made it much easier than ever before to separate your finances.

Here are some of the benefits of keeping your business and personal finances distinct:

1. It is tax efficient

From a tax standpoint from a tax perspective, mixing personal and business financial accounts can be a challenge.

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

It’s possible to add unnecessary compliance costs if you accountant must divide the tax-deductible items and what’s not, which is why it’s crucial to keep records and receipts.

2. A better understanding of business performance

The most important thing to consider when running any business successfully is be able to determine if the company is actually making a profit.

When you mix personal things with your business, it is often the wrong impression of how the company is performing.

It is crucial to take time to oversee your business, and regularly get away from the day-to day to ensure you keep an in mind both profits as well as cash flows.

3. It’s an opportunity to set the business up properly

You must protect the home of your family from creditors, and you can do it through your company structure, like using trusts for family members or companies , which can have separate ownership of your entities.

But you’ll need guidance to make it work properly. Consult a lawyer, accountant or financial advisor about how you can arrange and protect equity. It may save you thousands at time of need.

Get the structure right before you begin your business.

When you’re just starting out in business, you should not skimp on your preparation. This is an investment of a large amount. You don’t want to throw your money away just to make a saving of dollars in the beginning. Look at the fundamental due diligence including legal, financial as well as the business itself.

4. Create your credit score

Separating personal finance from business finances and using it to help grow your business can aid in building your business’s credit score.

This can help when negotiating with creditors or looking for more capital to grow.

In the event that you’re planning to buy an asset an excellent credit history could be a benefit to you as you could borrow at lower interest rates in the event of a need.

Ask for advice

With the introduction of alternative lenders that specialize in which make it easier for small-sized businesses to get finance Now is the perfect time to explore how to untangle your personal and professional financials.

We can help you through the process and provide advice on the best product and structure for your business and personal finances.