separate business and personal finance- Separating personal and business finance is very necessary for running a business, for maintaining records expenses and losses.
Separating your business and personal finances is not a difficult task. Taking the following actions can draw a clear line in the sand between the two.
Establish a separate legal entity
Open bank accounts specifically for your business
Implement a dedicated accounting system
Establish business credit
Use Caution When Commingling
The golden rule: for separating business and personal finance
1. Set up separate checking accounts- If you have separate checking accounts it becomes easy to find the data you need. You can find the right account, at the right time, you have a clear picture of everything you need to know. you may even be able to do your taxes and other financial reporting straight off your bank statements.
2. Keep separate place for receipts- you should have two
different physical places to store the receipts one is business and other is personal receipts. It also saves your time because when you need it you can easily check on the proper place and find it. And The simple truth is that a tax auditor is unlikely to care much about your personal expenses,
but will be very interested in your business receipts.
3.Give yourself a salary dont exceed it- If you write a check for the same amount every month from your business' checking account to your personal checking account, you can make it easier for both your personal finances and your business finances to stay on budget.
4.Set a budget for business- it is necessary to set a budget for business rather than pull out unnecessary money from the business. Many small business owners find themselves pull out money from their personal accounts into their company's whenever they need it. And sometimes it's unavoidable. But if you have a clear budget based on your business' current earnings, you can help avoid both.
5. Make sure your family and partners should understand your business status-
It's important to remember that you're not always the only person involved in either your personal finances or your business' finances. Making sure that everyone is on the same page now can prevent problems later on.
6.Understand who is a business expense and who isn’t- keeping your finances separate are entertainment, food and travel expenses. It's tempting to try to write off as much as you can as a tax deduction, but the simple fact is that dinners out with family and friends will not qualify as business expenses, no matter how you arrange things.
7.Draw lines between your home and office- Make the distance between your home and office especially in a case when you work from the office. If your working from home and you pay a certain bill to remember that from the money of your office you will not pay the entire bill of your house, this may create an imbalance of money in business.
8. Keep logs of business use- If you use a personal item, such as your car or your cell phone for business purposes on a regular basis, life would be easier if you could have a separate car and a separate phone just for your business, but if that isn't possible, there are plenty of easy logging tools to use, especially for smartphones.
9. Talk to financial professional- if you think that you are facing a problem in managing financial matters talk to the financial professionals they will help you in finding the solutions for your problems.
10. Get a personal accounting software for business- it is necessary to get a personal accounting software for business because the calculation of the data or the management of account should be separate in this case when we are separating the two that is business and personal finance.