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

If you’re just beginning your journey in business The temptation to run your business using your own bank account, or maybe make some purchases on your credit card at home, is a tempting one to fall for. We’ve all seen businesses funded in those early days by credit card, or by the founder’s redrawing of their mortgage.

Long-term, however, there are many advantages to be gained by keeping your personal finances separate from the business financials. The growing number of new sources of capital for small businesses makes it simpler than ever before to separate your finances.

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

1. It could be tax efficient

From a tax standpoint when it comes to tax, combining personal and business finances can get tricky.

It is not common to get tax deductions for personal expenses. you only get deductions for business expenses.

You could be adding additional compliance costs that aren’t needed if your accountant must divide the tax deductions and what’s not, so it’s important to keep track of receipts and other records.

2. A better understanding of company performance

The most important thing to consider when running your own business is to actually discern if the business is making a true profit.

If you mix personal belongings with business it often gives you an inaccurate picture of how the business is doing.

It is important to take time to run your company, and frequently get away from the day-to day to keep an in mind both profits as well as cash flows.

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

You need to protect your family home from the threat of creditors. You could do that by utilizing your corporate structure, such as using family trusts or companies to have separate ownership of your entities.

But you’ll need guidance for setting it up correctly. Consult a lawyer, financial advisor, or accountant about the best way to structure and protect equity. That advice may save you thousands of dollars at time of need.

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

When you’re just starting out in business, you should not skimp on the basics. This is an investment of a large amount. Don’t throw your entire life savings away just to save a few bucks when you first started. Examine the essential due diligence that includes legal, financial, and even the business itself.

4. Build your credit score

Separating personal finance from business finances and using the latter to expand your business will also help to improve your company’s credit score.

This is helpful when you’re negotiating with creditors or seeking further capital to grow.

In the event that you’re purchasing an asset, an excellent credit history could enable you to get a loan at a lower rate should the need arise.

Get help

With new specialist alternative lenders making it easier for small businesses to access finance This is the ideal opportunity to think about how you can break the ties between your personal and company financials.

We can help on the way, and help you choose the best options for products and structure for your company as well as personal financial needs.