Why you must keep your personal and business finances apart

If you’re just beginning your journey in business, the temptation to operate from your personal bank account, or maybe use your personal credit card is a tempting one to give in to. In actuality, we’ve seen businesses funded in the beginning of their business using a credit card, or by the business’s founders redrawing funds from their mortgage.

In the long run, however, there are big benefits to be gained from taking care to keep your private finances distinct from the business financials. The growing number of new sources of capital for small businesses has made it easier than ever to separate your financials.

Here are a few advantages of keeping your personal and personal finances separate

1. It can be more tax efficient

From a tax point of view, mixing business and personal financial accounts can be a challenge.

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

It’s possible to add unnecessary compliance costs if you accountant needs to divide the tax deductions and what’s not, so it’s important to keep records and receipts.

2. A better understanding of the business performance

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

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

It is vital to set aside the time to organize your businessand take a regular remove yourself from the daily routine to make sure you keep in mind both profits as well as cash flows.

3. This is a chance to get the business properly

It is essential to safeguard the home of your family from the threat of creditors. You can do it through your corporate structure, such as making use of family trusts or companies , which can have separate ownership of your business entities.

But you’ll need some help to properly set up your equity. Speak to a lawyer financial advisor, or accountant about the best way to arrange and protect equity. This advice will save you several thousand dollars of dollars at in the long run.

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

When you’re starting your own business, make sure you do your homework. This is an investment of a large amount. It is not a good idea to dump your life savings down the toilet because you wanted in order to cut a few bucks at the start. Consider the basic due diligence as well as the legal, financial and the business itself.

4. Build your credit score

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

This can help when negotiating with creditors or looking for additional capital to expand.

If you’re purchasing an asset, having a credit score that is good could allow you to borrow at lower interest rates when the need arises.

Get help

With new specialist alternative lenders helping small businesses to access finance Now is the perfect opportunity to think about how you can untangle your personal and professional financials.

We can guide your through this process and provide advice on the most suitable products and structure for your business as well as personal financial needs.