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

When you’re first starting out in business The temptation to run your business from your personal financial account (or maybe make some purchases on your personal credit card, is an easy one to give in to. In actuality, we’ve been told of companies that funded in the early days with a credit card, or the business’s founders redrawing funds from their mortgage.

Over the long-term, however there are many advantages to be gained from maintaining your finances separate from your business’s financials. The proliferation of new sources of capital for small businesses are making it much easier than ever before to separate your financials.

Here are some of the advantages of keeping your personal and personal finances in a separate manner:

1. It is efficient in terms of taxation.

From a tax point of view when it comes to tax, combining personal and business finances can be difficult.

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

There’s a chance that you’re adding unnecessary compliance expenses if your accountant must divide the tax-deductible items and what’s not, which is why it’s crucial to keep track of receipts and other records.

2. A better understanding of business performance

The main thing you need to do when operating any business successfully is actually determine if your business is actually making a profit.

If you mix personal items with the business it can give you an inaccurate picture of what the business’s performance is.

It is important to take time to run your businessand take a regular step back from the day-to-day to ensure you keep an an eye on both profit as well as cash flows.

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

You need to protect your home from the wrath of creditors. You can do that through your company structure, like the use of family trusts or corporations to distinct ownership of your companies.

But you’ll need guidance to set it up properly. Speak to a lawyer accountant or financial advisor about the best way to create and protect equity. That advice could save you thousands of dollars at time of need.

Be sure to have the proper structure in place prior to you launch your business.

If you are just beginning your business, you should not skimp on the basics. This is an investment of a large amount. It’s not wise to pour your entire life savings away because you wanted to make a saving of bucks at the start. Look at the fundamental due diligence as well as the legal, financial and the business itself.

4. Get your credit score up

Separating personal finance from business finances and using the latter to grow your business will aid in establishing your company’s credit score.

This can be helpful in negotiations with creditors, or when looking to raise more capital to help grow.

If you’re looking to purchase an asset a good credit history might mean you can obtain loans with lower interest rates whenever the need arises.

Get advice

With new specialist alternative lenders which make it easier for small businesses to obtain finance It’s the perfect moment to look into ways to untangle your personal and professional financials.

We are able to guide clients through the procedure and help you choose the best products and structures for your business and personal finances.