When you are a small business, it is easy to get your personal and business finances all mixed up together. It is common to think that it isn’t really a problem as long as you keep receipts and records.
However, once entangled, it can be a sticky process to untangle. It is far better to keep your personal and business finances separate from the beginning. A few simple steps will get you all set up to keep things separate.
- Get a separate bank account with its own checks and debit card. Keeping receipts is really important, but it is still much simpler if your money for personal use and business use are in different accounts.
- If using credit cards for your business, be sure to have a separate one that is designated for business use. And better still, in the business’ name.
- If for some reason, you donate personal property to the business, pay for something with the wrong card, or receive money from the business account, record it properly for both tax and tracking purposes. As a business owner, if you don’t know what the business owns, where money is coming from or going to, you cannot know the true state of your business. A good bookkeeper can really be helpful for this.
- Get your business set up properly. It is best to really examine your options, but know that as a sole proprietor, you have no extra benefits and none of the protection that an LLC or corporation offers. Also, make sure you have checked into the proper licensing for running a business in your city and state.
By taking these few, simple steps, your personal and business finances can be easily kept separate. There will be no messy untangling as you go to prepare your taxes, or in the future as your business grows.