By William Hughes Like most other small business owners, you probably used your own savings to launch your company and get it up on its fe...
Like most other small business owners, you probably used your own savings to launch your company and get it up on its feet. While there's nothing wrong with this, it's very important that you treat your company as a separate entity from yourself. This means implementing a boundary between business and private finances, a move that's crucial in facilitating tactical money management.
Unless you keep your business and personal accounts separate, you'll likely face a nightmare sifting through your statements during tax season. Chances are that you'll include personal expenses in your company's tax returns, or even fail to spot them altogether. None of these two instances will lead to pleasant outcomes, so why not just split your accounts and keep your sanity?
No matter how small your company is, you want other parties to feel confident in their dealings with you. While there's much you can do to polish your professional image, combining your finances won't help your cause. Customers will start doubting your credentials when they make payments into a bank account in your own name. In other words, your business is more than a hobby to them, and your finances should be treated as such.
One of the benefits of structuring your business as a corporation is the shield that this status provides to your personal assets. For this to work, you have to separate them from those owned by your company. Otherwise, any action filed against your company by creditors will expose your wealth to forfeiture.
Whether it's the seasonal working capital injection or a long-term loan, funding from outside sources will be vital to the growth of your company. Keeping finances separate means your business will develop its own credit profile, which will come in handy when you will be dealing with lenders. It will also save you a lot of work when demonstrating your firm's financial records.
Tracking your organization's financial health is part of what you should be doing to maintain progress in the right direction. Without discounting the need for professional bookkeeping, this will be easy to do when business records are kept clean and error-free. On the same vein, your accounting department will also appreciate the effort you've put into splitting your finances.
Detaching your financial life from that of your firm will minimize the temptation to use personal funds to sort out business expenses. You'll also be able to increase your earnings as a shareholder without compromising the solvency of your company. It's not unusual for otherwise profitable ventures to be run into the ground simply because their shareholders adopted the wrong mindset with regards to finances. The only way to avoid this possibility is to run your business as an independent entity.
You already know that blurring the lines between leisure and business is always a bad idea. So why are you still using a casual approach to manage your firms's finances? There's no discounting the convenience of blending them with your own, but the severe consequences you risk facing should make you think otherwise.
Unless you keep your business and personal accounts separate, you'll likely face a nightmare sifting through your statements during tax season. Chances are that you'll include personal expenses in your company's tax returns, or even fail to spot them altogether. None of these two instances will lead to pleasant outcomes, so why not just split your accounts and keep your sanity?
No matter how small your company is, you want other parties to feel confident in their dealings with you. While there's much you can do to polish your professional image, combining your finances won't help your cause. Customers will start doubting your credentials when they make payments into a bank account in your own name. In other words, your business is more than a hobby to them, and your finances should be treated as such.
One of the benefits of structuring your business as a corporation is the shield that this status provides to your personal assets. For this to work, you have to separate them from those owned by your company. Otherwise, any action filed against your company by creditors will expose your wealth to forfeiture.
Whether it's the seasonal working capital injection or a long-term loan, funding from outside sources will be vital to the growth of your company. Keeping finances separate means your business will develop its own credit profile, which will come in handy when you will be dealing with lenders. It will also save you a lot of work when demonstrating your firm's financial records.
Tracking your organization's financial health is part of what you should be doing to maintain progress in the right direction. Without discounting the need for professional bookkeeping, this will be easy to do when business records are kept clean and error-free. On the same vein, your accounting department will also appreciate the effort you've put into splitting your finances.
Detaching your financial life from that of your firm will minimize the temptation to use personal funds to sort out business expenses. You'll also be able to increase your earnings as a shareholder without compromising the solvency of your company. It's not unusual for otherwise profitable ventures to be run into the ground simply because their shareholders adopted the wrong mindset with regards to finances. The only way to avoid this possibility is to run your business as an independent entity.
You already know that blurring the lines between leisure and business is always a bad idea. So why are you still using a casual approach to manage your firms's finances? There's no discounting the convenience of blending them with your own, but the severe consequences you risk facing should make you think otherwise.
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