Why you need to keep your business and personal finances apart

If you’re beginning to establish your business The temptation to run your business from your personal bank account, or use your personal credit card, is an easy one to be enticed by. In fact, we’ve all seen businesses funded in those early days by credit card or the business’s founders redrawing funds from their mortgage.

Over the long-term, however there are big benefits to be gained by maintaining your finances separate from the business financials. The rise of new funding sources for small businesses are making it simpler than ever before to keep your finances separate.

Here are some of the benefits of keeping your company and personal finances separate

1. It can be more tax efficient

From a tax point of view when it comes to tax, combining personal and business finances can be difficult.

Taxes generally do not allow deductions for personal expenditure; it’s your business expenses that count.

It’s possible to add additional compliance costs that aren’t needed if your accountant must divide what’s tax deductible and what’s not. Therefore, it’s essential to keep receipts and documents.

2. A better understanding of business performance

The most important thing to consider when running the business you own is identify if the business is actually making money.

When you mix personal items with the business it usually gives you an inaccurate picture of what the business’s performance is.

It is essential to take the time to organize your businessand take a regular remove yourself from the daily routine to ensure you keep an the eye on profit as well as cash flows.

3. This is a chance to get the business properly

You must protect your family home from creditors. You can do this through your company structure, like the use of family trusts or companies that have separate ownership of your entities.

But you’ll need some help to set it up properly. Talk to a lawyer, financial planner or accountant to discuss how you can structure and protect equity. This advice will save you several thousand dollars of dollars at time of need.

Be sure to have the proper structure in place prior to you go into business.

When you’re starting your own business, you should not skimp on your homework. This is an investment of a large amount. Don’t throw your life savings down the toilet in order to make a saving of bucks at the start. Examine the essential due diligence that includes legal, financial, and the company itself.

4. Get your credit score up

Separating personal finances from your business’s finances and using the latter to expand your business will also help in establishing your company’s credit score.

This can be helpful in negotiations with creditors or when you’re looking for more capital to grow.

In the event that you’re purchasing an asset, an excellent credit history could mean you can borrow at lower interest rates should the need arise.

Receive advice

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

We can guide on the way, and offer advice on the most suitable products and structure for your company as well as personal financial needs.