Avoiding (Financial) Separation Anxiety


Make your own hours. Write your own paycheck. It’s hard to argue – there are certainly some compelling benefits to owning your ownbusiness. And if you’re among the growing number of people who work at home today, you can take advantage of another – work in your pajamas! But having your own business, particularly one that’s based in your home, is not without its challenges.

One of the challenges associated with running your own small business is separating your personal life from your business life. One of the challenges associated with running your own small business is separating your personal life from your business life. It can be hard not to think about your work when it’s lying on your dining room table. But perhaps the greatest challenge facing small business owners is to separate their personal finances from their business finances. It’s one of the most common mistakes new business owners make, and one that can really make both creditors and the IRS stand up and take notice.

Keeping your business and personal finances separate can help you to establish credit for your business. So, as your company grows, you’ll be more likely to get the financing you need if you want to expand. Also, you may be eligible for certain tax deductions for your business, such as mileage on your car or a home/office deduction.   Consult your tax advisor for further information.  By integrating your business and personal finances, you may cause the IRS to question the validity of your business deductions, which could then lead to a painful and expensive audit.

Here are some tips to ensure you and your business get off to a good and separate start:

  • Open a separate account for your business under the name of your business. This will help you keep your business income and expenses separate from your personal expenses.
  • A separate account also means separate checks. Be sure to order different color checks. It can be easy to mix up your accounts if the checks look the same.
  • Establish a pay period, and transfer money or write a check from your business account to your personal account. If your business is just starting out and you haven’t earned enough to get a paycheck, just fund your business with the money you need to pay business expenses.
  • Link your business and personal account with Online Banking. That way, you can transfer your pay quickly and easily.
  • Obtain separate debit and credit cards. When you have to make a purchase for your business, make sure to use your business credit or debit card.
  • When you receive payments for your business, make them payable to the name of the business and not you personally. This will avoid confusion, and it will also establish credibility for your business.
  • Keeping separate expenses for your personal and business will make preparing your taxes much easier. And if there’s any way to lessen the burden at tax time, you want to take advantage of it!

Keep in mind that if your business begins to grow, you will also have to spend more time managing your accounts. At some point, you may want to consider hiring a bookkeeper to help you. You might also consider using bookkeeping software like QuickBooks, which makes tracking income and expenses easier.

To open an account for your business or to learn more about simple and smart ways to separate your personal and business finances, stop by your nearest branch or call us today.

 

Related Articles

Leave a Reply