There are a lot of decisions to make when you start your own business. One of the most important decisions is how you will manage your money. Keeping your business finances separate from your personal finances will save you stress and worry later on.
Keep Separate Bank Accounts
The best way to separate your business and personal finances is to have separate bank accounts. TD Bank recommends you open a business bank account with both a checking account and savings account if you need it. All of your business revenue should go into this bank account, not your personal one. That way you can pay business expenses, deposit money, and pay invoices all without having to use or mix up with your own money. Different banks may offer different benefits to business accounts, so you should shop around for the bank that can do the most for your business.
Register an LLC
Another good way to protect your personal finances is to run your business through an LLC. According to Freeman Lovell, an LLC ensures your personal assets are not at risk. Having an LLC will keep you and your personal finances safe from lawsuits and any other claims against your business. An LLC can also provide your business with tax benefits. For corporations, the owner’s income is taxed both through the business and the individual, but LLCs avoid this double taxation. In addition, LLCs may deduct up to 20 percent of their income.
Open a Business Credit Card
Opening a business credit card is another good way to separate your personal and business finances. Paying for business expenses with your personal credit card can impact your credit score. According to Legal Zoom, spending money on your business credit card can help you build your business credit score. The benefits of building good credit as a business include allowing you to grow your business by establishing yourself as a trust-worthy borrower, and the ability to have a higher credit limit. Several different types of business credit cards can offer you good benefits, like 0% APR for a year, no annual fees, and bonus points on what you spend.
One of the first things you should do when you establish a business is to separate your personal money from your business funds. Doing so will help you keep better business financial records which is important for filing taxes and getting through an audit. This way, you can worry less about finances and focus on building your business!
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