It may seem practical to combine personal and business finances when managing a growing or new venture. This approach can cause business owners to have headaches. One set of accounts can increase your risk. Financial issues at your business can impact your personal assets and vice versa. We’ll look at some common problems that can arise when personal and business finances are mixed.
Simple beginnings can lead to major problems later on
Many small business owners choose to combine their personal and business finances because of the ease. All of your money can be seen in one place. This can save you time and make it easy to track your expenses. This sense of ease will quickly disappear. Personal accounts can cause problems when it comes to reviewing expenses and asking customers for payment.
Separating your business and personal banking can make it difficult to manage your taxes. According to The Balance, it can also result in missing business deductions which lower your tax bill. This means that your accountant will have to spend more time and money on this process. If your business is audited by the IRS, you will have to do even more work if personal and business finances are mixed.
A client may also see it as a warning sign if you write a check in your own name or transfer funds into an account under your company’s name. Payments made in your business name show that you are a legitimate company.
The Legal Issues That Can Arise When Personal Finances Are Mixed With Business Finances
Separating personal and business account is important for businesses because of issues such as audits and paying taxes. Depending on the legal structure of your business, you may have to keep separate accounts. If your company is a corporation it is an independent legal entity. Intuit explained that this means you need to maintain separate accounts. If you run a sole proprietorship there is no legal distinction made between the company and you. It’s best to maintain two separate sets of accounts. Separate accounts can make it easier to track and share information when you are facing an audit or legal issue.
When should I open my business accounts?
When you first start your business, it is best to establish separate business banking. Now is the second best time. Look at local and online banking. Check out the account types, fees and interest rates offered by each bank before making a decision.
In some cases, if you have mixed up your personal and business finances before, you will still need to spend extra time sorting through documents to separate income from expenditure. You’ll save a lot of time in the future.
How to Make Good Financial Decisions for Your Company
can better manage the money of your business by avoiding the temptation to mix up personal and company finances.
Finding the right lending partner for your business is essential when you need to infuse funds into development or take advantage of an opportunity. We at QuickBridge are proud of the close relationship we have with our customers. This helps you find the right type of loan to suit your needs.
Contact us today to find out how we can assist you in making good financial decisions for your business to promote growth and stability.
