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

If you’re beginning to establish your business The temptation to operate through your personal banking account or maybe make some purchases on your credit card at home, is a tempting one to fall for. In reality, we’ve all seen businesses funded in those early days by credit card, or by the founder’s redrawing their mortgage.

In the long term, however, there are huge benefits to be gained from maintaining your finances distinct from the business financials. The proliferation of new sources of financing for small businesses makes it easier than ever to separate your finances.

Here are some of the advantages of keeping your personal and personal finances distinct:

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

From a tax viewpoint from a tax perspective, mixing personal and business finances can get tricky.

You generally don’t get tax deductions for personal expenditure; it’s just your business expenses.

There’s a risk of 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 identify if the business is actually making a profit.

If you mix personal items with business it usually gives you the wrong impression of how the business is doing.

It is essential to take time to oversee your businessand to regularly step back from the day-to-day to ensure you keep an focus on profit as well as cash flows.

3. This is a chance to get the business properly

You must protect your home from creditors, and you can do this through your corporate structure, such as using trusts for family members or corporations to separate ownership of your businesses.

However, you need help to set it up properly. Consult a lawyer, accountant or financial advisor about how you can create and protect equity. This advice can save thousands of dollars at when you’re done.

Get the structure right before you go into business.

When you’re just starting out in business, be sure to do your homework. This is an investment of a large amount. It is not a good idea to dump your money away in order for a savings of a couple bucks when you first started. Consider the basic due diligence as well as the legal, financial and the company itself.

4. Create your credit score

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

This is helpful when you’re negotiating with creditors or looking to raise more capital to help grow.

If you’re planning to buy an asset a good credit history might enable you to take out loans at lower rates in the event of a need.

Receive advice

With the introduction of specialist alternative lenders helping small-sized companies to access financing Now is the perfect time to consider ways to untangle your personal and professional financials.

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