What is one piece of advice you have for someone who wants to keep their personal and business finances separate?
To help you find a way to keep your personal and business finances separate, we asked financial experts and business leaders this question for their best tips. From tracking expenses to consulting a CPA, there are several things that may help you keep your personal and business finances separate.
Here are seven pieces of advice you have for someone who wants to keep their personal and business finances separate:
- Track Your Expenses
- Establish an S-Corp
- Create Separate Bank Accounts
- Pay Yourself a Salary
- Build Different Books
- Consult with a CPA
- Use Business Accounts for Business
Track Your Expenses
One great thing about business finances is that a lot of them can be tax-deductible, however, you will want to limit how often you use your business card for personal needs. When you do use your business card, make sure you can get a copy of your receipt as it will come in handy when you end up doing your taxes. Having that financial separation will lead to having clean business financial records and no stress as your business builds reputation down the line.
Jacob Dayan, Community Tax
Establish an S-Corp
Our business is registered as an LLC, but for tax purposes, we file as a S-Corp. One thing I enjoy about a S-Corp is the ability to keep business and personal finances separate. As a business owner, it can be tempting to dip into a business checking account to fund personal purchases. But when you have a S-Corp, every withdrawal from a business checking account is treated as a shareholder distribution – and is taxed accordingly. The tax implications are just enough of a deterrent for me to help keep personal and business finances separate.
Brett Farmiloe, Markitors
Create Separate Bank Accounts
Make sure that you have separate bank accounts for your personal finances and your business finances. This is often required, in fact, depending on the type of business you are running. Either way, this will make it much easier to distinguish how you are doing financially in your personal life versus how you are doing financially business-wise. Just because the status of your personal finances is strong, this does not necessarily mean that the status of your businesses finances are automatically strong as well (and vice versa). With this mentality you can really focus on your business as a separate entity from yourself and feel more motivated to keep the business going.
Ben Teicher, Healthy Directions
Pay Yourself a Salary
One helpful way to keep your business and personal finances separate is to pay yourself a salary. Each pay period, if you allow a certain amount to pay yourself, you can effectively maintain an income while preventing mismanagement of your business finances in any way. Furthermore, keep the business checking account and credit card strictly for business purchases. By creating a “hands-off” approach, you can easily separate your personal account and business finances without room for error or discrepancy between the two.
Katie Lyon, Allegiance Flag Supply
Build Different Books
You need to have two separate bank accounts when it comes to managing your personal and business finances. Not only will a business account be specifically set up to handle your business operations – but it will also make it a whole lot easier to keep the two differentiated. You should also get on board the Google Sheets train to keep track of your personal budgets and your business accounts. It’s totally free, and you get really creative with your spreadsheets, as well as inserting specific functions to make calculations a total breeze. Using separate sheets will also mean you never get yourself into a muddle with the figures – and you’ll always have a holistic view of your finances.
Chris Pantelli, LifeUpswing
Consult with a CPA
If you have a legal business entity, it is imperative personal finances are not run through the business to maintain the business entity’s legal protections. A business checking account and credit card in the company name allow all business income and expenses to be separated. Consult with your CPA to determine the appropriate way for your entity to get funds for personal use out of the company through a member draw, salary, or shareholder distribution. When money is distributed through one of these methods from your business to you personally, it maintains the integrity and corporate veil for the entity.
Kimberly Bogues, Flourish Business Services, LLC
Use Business Accounts for Business
As a small Business Owner, keeping your business and personal finances separate is crucial particularly when it comes to sorting out your Tax affairs. The simplest way I manage it is to have two completely separate bank accounts. One for my business and one from my personal use. I only use the business bank account purely for my business needs. If I need money (such as wages etc), I will transfer it via my business bank account to my personal bank account and clearly note that it is withdrawals or wages. I find this process helps me to keep everything separate and easily traceable.
Derek English, Engineer My Freedom