Why you need to keep your personal and business finances apart

If you’re beginning to establish your business The temptation to run your business out of your personal banking account or perhaps use your personal credit card, is an easy one to fall for. We’ve all known of businesses that were able to fund in the early days with a credit card, or by the business’s founders redrawing funds from their mortgage.

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

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

1. It can be more tax efficient

From a tax viewpoint the combination of personal and business financial affairs can be tricky.

There aren’t any tax deductions for personal expenses. it’s only your business expenses.

It’s possible to add unnecessary compliance costs if your accountant must divide the tax-deductible items and what’s not. It’s therefore important to keep records and receipts.

2. An understanding of business performance

The most important aspect to running any business successfully is identify if the business is actually earning a profit.

When you mix personal things with your business, it can give you the wrong impression of what the business’s performance is.

It is important to take time to oversee your businessand take a regular get away from the day-to day to ensure that you keep an in mind both profits and cash flow.

3. It’s an opportunity to set the business properly

You must protect the home of your family from the wrath of creditors. You can do that through the structure of your business, for instance, making use of family trusts or companies , which can have separate ownership of your business entities.

But you’ll need some help to set it up properly. Consult a lawyer, financial advisor, or accountant about the best way to create and protect equity. The advice you receive can save thousands at the end of the day.

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

When you’re starting your own business, make sure you do your preparation. It’s a major investment. Don’t throw your entire life savings away simply because you want to make a saving of bucks at the start. Look at the fundamental due diligence that includes legal, financial, and even the business itself.

4. Build your credit score

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

This is helpful when you’re negotiating with creditors or when you’re seeking further capital to grow.

In the event that you’re planning to buy an asset having a strong credit rating could be a benefit to you as you could take out loans at lower rates when the need arises.

Get help

With new alternative lenders that specialize in helping small-sized businesses to get finance This is the ideal opportunity to think about how you can separate your personal and business finances.

We’re able to help your through this process, and offer advice on the best products and structure for your business and personal finance.