Many business owners are guilty of mixing their business and personal finances far too often. Even if you're just starting out, it’s important to try as best as possible to separate both. Treat your business, whether small or large, as a viable entity.
Even though you may feel like your business and personal expenses are the same, they should be treated separately. If you are considering expanding in the future, potential investors will be interested in taking a look at your accounting records.
Here are two ways to separate your business and personal finances:
Register your business
Even if you start out as sole proprietorship, consider establishing a limited liability company for your business. Consult your attorney and financial or insurance agents to assess the best entity to register, how it will impact your taxes, and the financial obligations of each option.
Open separate chequing accounts
If you utilize accounting software such as Quickbooks (we hope you do), make sure to have separate accounts for business and personal. This will be beneficial for tax purposes, and will also help you to be more organized. At the end of the year, all your income and expenses will be in its correct place, making record keeping and tax filing easier. Keeping good records is important and will prove itself so if you should ever be audited.
Once you separate both, you will be better able to track how well your business is doing and identify any areas that may need to be improved.
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