Here's why you must keep your business and personal finances apart

If you’re beginning to establish your business The temptation to operate out of your personal banking account or perhaps use your credit card at home, is easy to fall for. In reality, we’ve all seen businesses funded in in the early days with a credit card or the founder’s redrawing of their mortgage.

In the long run, however, there are many benefits to be gained from maintaining your finances separate from your business’s financials. The rise of new sources of capital for small businesses makes it much easier than ever before to separate your financials.

Here are a few benefits of keeping your company and personal finances in a separate manner:

1. It can be more tax efficient.

From a tax standpoint when it comes to tax, combining personal and business financial affairs can be tricky.

Taxes generally do not allow deductions for personal expenses. you only get deductions for business expenses.

You could be adding additional compliance costs that aren’t needed if your accountant is required to separate the tax-deductible items and what’s not, so it’s important to keep receipts and records.

2. A better understanding of company performance

The most important aspect to running any business successfully is discern if the business is making a true profit.

When you mix your personal items with business it is often the wrong impression of how the company is performing.

It is vital to set aside time to oversee your businessand take a regular step back from the day-to-day to ensure you keep an the eye on profit and cash flow.

3. This is an opportunity to establish the business up properly

You need to protect your family home from creditors. You can do this through your business structure, for example, using family trusts or companies that have separate ownership of your businesses.

But you really need advice for setting it up correctly. Talk to a lawyer, accountant or financial advisor about how to arrange and protect equity. It could save you thousands at when you’re done.

Make sure you have the right structure in place before you launch your business.

When starting out in business, be sure to do your preparation. This is an investment of a large amount. It’s not wise to pour your livelihood down the drain simply because you want to make a saving of bucks at the start. Examine the essential due diligence including legal, financial and even the business itself.

4. Create your credit score

Separating personal finances from your business’s finances and using the latter to grow your business will also help in building your company’s credit score.

This can be helpful in negotiations with creditors or when you’re looking for more capital to grow.

In the event that you’re planning to buy an asset having a strong credit rating could enable you to obtain loans with lower interest rates in the event of a need.

Ask for advice

With the introduction of alternative lenders that specialize in helping small-sized businesses to get finance It’s the perfect opportunity to think about how you can separate your personal and business financials.

We can guide on the way and advise on the most suitable products and structures for your business as well as personal financial needs.