How Separating Your Finances Can Protect Your Business and Your Personal Life
Updated: Mar 17
Hey there Busy Bees! 🐝, it's your girl Diana, aka the Bookkeepers Keeper, and today I want to talk to you about something that might not sound all that exciting: separating your personal and business finances. But trust me, this is important stuff.
When you're starting out, it can be tempting to mix your personal and business funds. After all, you're the boss, right? But here's the thing: mixing your finances can lead to all sorts of problems down the road.
For one, it can mess with your financial reporting. Come tax time, you'll be pulling out your hair trying to figure out what's what. And if you ever get audited, you'll have a hard time proving which expenses are actually related to your business.
And speaking of audits, if you get sued or face legal issues, mixing your finances can put your personal assets at risk. Not cool.
So, what can you do to keep your finances separate? First, set up a separate bank account and credit card for your business expenses. This way, you'll be able to keep track of everything and avoid dipping into your business funds for personal purchases.
Next, keep your receipts, use accounting software, and regularly reconcile your accounts to make sure everything is accurate and up-to-date. Trust me, this will make tax time a whole lot less stressful.
And finally, make sure to pay yourself a salary from your business profits. It might be tempting to use that money for personal expenses, but resist the urge. This will help you avoid any potential legal issues down the road.
So, there you have it: separating your personal and business finances might not be the most exciting thing in the world, but it's essential for protecting both your business and your personal life.