The #1 mistake most new business owners make is mixing personal and business expenses.
But why is this a mistake and how can this affect your business?
The answer is simple: it just makes things more clear.
Separating your business finances from your personal will save you time, and money when tax season comes. You, or your tax professional, will be able to clearly see what is a deductible business expense. That trip to Target? It’ll be hard to prove that it was a business expense if it was paid with your personal card. (This is always my first tip to remove a layer of stress from tax season).
Your business should be a separated entity – it should be able to run on its own. Separating your finance helps to create a layer of protection on your personal assets. If you’re an LLC, S-Corp, Partnership, etc., by “mixing” personal and business you might lose the protection of a separated entity.
If you do not have a separated entity for your business, you can still request an EIN with the IRS for banking purposes.
Avoid commingling also helps make your business look legit – if you’re looking for a loan, proof of income, you name it – having your business financials nicely, gives you the power of knowing where your business stands.
Those are just a few of the reasons to keep your business and personal finances separated.
If you’re looking for a DIY Bookkeeping system for your business, check out our template shop.
Have any questions, comments? Let us know on the comments below. I can’t wait to hear about your journey into entrepreneurship!