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

If you’re beginning to establish your business it’s easy to fall prey to operating out of your personal banking account or perhaps make some purchases on your personal credit card, is an easy one to fall for. In fact, we’ve all been told of companies that funded the beginning of their business using a credit card, or by the business’s founders redrawing funds from their mortgage.

Long-term, however, there are many benefits to be gained from maintaining your finances separate from your business’s finances. The rise of new sources of financing for small businesses makes it easier than ever to separate your finances.

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

1. It may be more efficient with respect to taxation.

From a tax standpoint the combination of personal and business finances can be difficult.

There aren’t any tax deductions on personal expenses, it’s just your business expenses.

It’s possible to add unnecessary compliance costs if your accountant is required to separate the tax deductions and what’s not. Therefore, it’s essential to keep receipts and records.

2. A better understanding of the business performance

The most important aspect to running an enterprise is be able to determine if the company is making a true profit.

When you mix personal things with your business, it is often the wrong impression of how the company is performing.

It is crucial to take time to oversee your businessand to regularly remove yourself from the daily routine to ensure you keep an in mind both profits and cash flow.

3. This is a chance to get your business up properly

You must protect the home of your family from creditors. You can do that through your corporate structure, such as the use of family trusts or companies that have separate ownership of your businesses.

But you’ll need guidance to set it up properly. Talk to a lawyer, accountant or financial advisor about how you can create and protect equity. That advice can save thousands of dollars at when you’re done.

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

When starting out in business, be sure to do the basics. This is a significant investment. You don’t want to throw your money away just to save a few dollars initially. Examine the essential due diligence, financial, legal as well as the business itself.

4. Build your credit score

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

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

If you’re planning to buy an asset an excellent credit history could be a benefit to you as you could take out loans at lower rates when the need arises.

Get advice

With new specialist alternative lenders making it easier for small businesses to obtain finance This is the ideal opportunity to think about how you can decouple your personal and business financials.

We can help clients through the procedure and offer advice on the best products and structure for your business as well as personal financial needs.