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

If you’re just beginning your journey in business The temptation to run your business out of your personal banking account or maybe bang some inventory on your personal credit card is an easy one to fall for. In fact, we’ve all been told of companies that funded those early days by credit card, or the founder’s redrawing their mortgage.

In the long term, however, there are huge benefits to be gained by keeping your personal finances distinct from your business’s financials. The increase in new sources of funding for small businesses makes it easier than ever to separate your financials.

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

1. It could be tax efficient

From a tax standpoint from a tax perspective, mixing personal and business financial accounts can be a challenge.

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

There’s a chance that you’re adding unnecessary compliance costs if you accountant has to split up which tax deductions are tax deductible and which not. Therefore, it’s essential to keep records and receipts.

2. An understanding of business performance

The key thing for running any business successfully is be able to determine if the company is actually making a profit.

If you combine personal belongings with business it often gives you the wrong impression of what the business’s performance is.

It is vital to set aside time to oversee your businessand to regularly remove yourself from the daily routine to ensure you keep an in mind both profits as well as cash flows.

3. It’s a great opportunity to set your business up properly

You must protect your family home from creditors, and you can do this through your business structure, for example, the use of family trusts or companies , which can have distinct ownership of your companies.

But you’ll need some help for setting it up correctly. Talk to a lawyer, financial advisor or accountant about how to arrange and protect equity. The advice you receive will save you several thousand dollars of dollars at time of need.

Be sure to have the proper structure in place prior to you go into business.

When starting out in business, be sure to do the basics. This is a substantial investment. It’s not wise to pour your entire life savings away in order to make a saving of bucks when you first started. Examine the essential due diligence as well as the legal, financial and even the business itself.

4. Improve your credit score

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

This can help when negotiating with creditors, or when looking for more capital to grow.

If you’re purchasing an asset, an excellent credit history could be a benefit to you as you could take out loans at lower rates should the need arise.

Get help

With new alternative lenders that specialize in that make it easier for small businesses to access finance Now is the perfect time to consider ways to decouple your personal and business finances.

We are able to guide your through this process and advise on the best product and structure for your business and personal finances.