Why you need to keep your business and personal finances apart

If you’re just beginning your journey in business The temptation to run your business using your own financial account (or 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 during the beginning using a credit card or the founder’s redrawing of their mortgage.

In the long term, however, there are big benefits to be gained from keeping your personal finances separate from your business finances. The rise of new sources of funding for small businesses has made it much easier than ever before to separate your finances.

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

1. It could be efficient in terms of taxation.

From a tax perspective when it comes to tax, combining personal and business financial affairs can be tricky.

Taxes generally do not allow deductions for personal expenditure; you only get deductions for business expenses.

You could be adding additional compliance costs that aren’t needed if your accountant needs to divide which tax deductions are tax deductible and which not, so it’s important to keep receipts and records.

2. An understanding of business performance

The key thing for running any business successfully is discern if the business is making a true profit.

When you mix personal items with business it often gives you a false reading as to how the company is performing.

It is crucial to take the time to organize your businessand take a regular get away from the day-to day to make sure you keep an eye on both profit as well as cash flows.

3. This is a chance to get the business properly

You have to secure your family home from creditors, and you can do it through your company structure, like the use of family trusts or companies , which can have separate ownership of your businesses.

But you really need advice to make it work properly. Consult a lawyer, accountant or financial advisor about how you can create and protect equity. This advice could save you thousands at when you’re done.

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

When starting out in business, don’t skimp on the basics. This is an investment of a large amount. You don’t want to throw your entire life savings away just to save a few bucks initially. Take a look at the most fundamental due diligence as well as the legal, financial and the company itself.

4. Build your credit score

Separating personal finances from business finances and using it to grow your business will also help to improve your company’s credit score.

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

If you’re looking to purchase an asset an excellent credit history could mean you can take out loans at lower rates in the event of a need.

Get help

With new specialist alternative lenders helping small businesses to obtain finance It’s the perfect time to consider ways to separate your personal and business finances.

We are able to guide your through this process, and offer advice on the best options for products and structure for your company and personal finances.