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

If you’re beginning to establish your business The temptation to run your business out of your personal financial account (or maybe put some money into your personal credit card, is easy to fall for. In actuality, we’ve known of businesses that were able to fund the beginning of their business using a credit card or the founder’s redrawing of their mortgage.

Long-term, however, there are many benefits to be gained by keeping your personal finances separate from the business financials. The proliferation of new sources of funding for small businesses has made it simpler than ever before to keep your finances separate.

Here are a few benefits of keeping your business and personal finances in a separate manner:

1. It is efficient in terms of taxation.

From a tax standpoint, mixing business and personal finances can get tricky.

You generally don’t get tax deductions for personal expenditure; it’s your business expenses that count.

It’s possible to add unnecessary compliance expenses if your accountant must divide the tax deductions and what’s not. It’s therefore important to keep receipts and documents.

2. A better understanding of company performance

The main thing you need to do when operating any business successfully is actually identify if the business is actually making money.

If you mix personal belongings with business it usually gives you incorrect information about how the company is performing.

It is crucial to take time to oversee your company, and frequently take a break from your day-to-day activities to ensure you keep an the eye on profit as well as cash flows.

3. This is a chance to get the business up correctly

You have to secure the home of your family from the wrath of creditors. You can do that through the structure of your business, for instance, the use of family trusts or corporations to distinct ownership of your companies.

But you really need advice to set it up properly. Discuss with a lawyer financial advisor, or accountant about the best way to arrange and protect equity. It will save you several thousand dollars of dollars at in the long run.

Be sure to have the proper structure in place prior to you start your business.

When you’re just starting out in business, make sure you do your research. It’s a major investment. You don’t want to throw your entire life savings away simply because you want to make a saving of dollars initially. Consider the basic due diligence that includes legal, financial, and the business itself.

4. Get your credit score up

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

This can assist in negotiations with creditors, or when seeking further capital to grow.

In the event that you’re looking to purchase an asset a good credit history might allow you to borrow at lower interest rates whenever the need arises.

Get advice

With new specialist alternative lenders making it easier for small-sized businesses to get finance Now is the perfect moment to look into ways to separate your personal and business financials.

We are able to guide you through the process and provide advice on the best products and structures for your business and personal finance.