Here's why you must keep your personal and business finances apart

If you’re beginning to establish your business The temptation to operate out of your personal bank account, or maybe bang some inventory on your credit card at home, is a tempting one to be enticed by. We’ve all been told of companies that funded during the beginning using a credit card, or by the founder’s redrawing of their mortgage.

In the long run, however, there are many benefits to be gained by making sure your financial affairs are distinct from the business financials. The growing number of new sources of financing for small-sized businesses is making it easier than ever to keep your finances separate.

Here are some of the advantages of keeping your business and personal finances separate

1. It is tax efficient.

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

It is not common to get tax deductions for personal expenditure; it’s your business expenses that count.

There’s a risk of adding unnecessary compliance expenses if your accountant must divide what’s tax deductible and what’s not, which is why it’s crucial to keep receipts and records.

2. An understanding of business performance

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

If you combine personal items with business it is often incorrect information about how the business is doing.

It is crucial to take time to manage your business, and regularly get away from the day-to day to make sure you keep an eye on both profit and cash flow.

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

You have to secure the home of your family from creditors, and you can do that through your corporate structure, such as using family trusts or companies that have separate ownership of your entities.

But you really need advice to properly set up your equity. Speak to a lawyer financial planner or accountant to discuss the best way to organize and safeguard equity. This advice may save you thousands of dollars at when you’re done.

Make sure you have the right structure in place before you start your business.

When starting out in business, make sure you do your research. It’s a major investment. It is not a good idea to dump your life savings down the toilet in order to make a saving of dollars at the start. Consider the basic due diligence including legal, financial and the business itself.

4. Improve your credit score

Separating personal finance from your business’s finances and using the latter to help grow your business can aid in establishing your company’s credit score.

This can be helpful in negotiations with creditors or looking for additional capital to expand.

If you’re looking to purchase an asset having a credit score that is good could enable you to obtain loans with lower interest rates in the event of a need.

Receive advice

With new alternative lenders that specialize in which make it easier for small-sized businesses to get finance It’s the perfect opportunity to think about how you can untangle your personal and professional financials.

We can help clients through the procedure, and provide advice on the best options for products and structure for your business and personal finances.