Starting a new business? Separate your Business and Personal Finances
We see you with your brilliant ideas! Word on the street is that you’ve decided to put all those good ideas to use by starting your own business - congratulations! Now that you’ve decided to pursue your big dream, it’s time to talk about how to set your business on a path to financial success.
Time and time again, we hear from business owners who got carried away with their amazing ideas and completely forgot to separate their business and personal finances. The problem is that this creates a huge mess down the line. Not only is mixing business and personal finances out of compliance for many businesses, it can also create a huge headache in the case of any legal disputes or tax audits.
We know setting up bank accounts is no fun, but it’s an important step to running a thriving and successful business. Here’s why you should make that move TODAY.
Protect your Personal Assets with the Corporate Veil
When you start a new business, your biggest priority should be to protect your personal
assets. “The Corporate Veil” is the barrier between your business and personal finances that will protect you in case of any legal disputes. On one side of the veil are your business expenses and revenues. On the other side are your personal finances. When you start to use your business card to pay for dry cleaning, Netflix subscriptions, personal groceries, etc, you are poking holes in the veil.
So why does this matter? Great question! It is important because the veil is a protection between your personal finances and your business finances. If your business is sued for any reason, the holes you’ve poked in that veil will give the opposing legal team evidence that your personal and business finances are so inter-mingled that they can go after your personal assets as well. While this scenario is pretty extreme, it’s important to know that this danger exists and can be avoided by some simple, self-disciplined procedures
Make Tax Season Easy
Whether you’re so new you have yet to make a sale or you have been up and operating for a few months, every new business should keep taxes in mind. Having a business bank account will ensure that all of your income and expenses are accounted for in one place, reducing stress and making you much more prepared to handle an audit. Having a business account will also make it easier for your CPA to determine quarterly tax payments.
Utilize your Financial Data
Imagine that you’re months into running a successful business but you have no way of knowing how your money is made or what strategies helped get you here. What a bummer! Setting up a business bank account from the beginning can help you avoid this annoying situation. Separating your transactions will automatically provide a clearer picture of your business finances and simplify the processes of running your profit and loss reports, creating your balance sheets, and generating your cash flow statements. Bonus points if you hire a bookkeeper to help you take full advantage of the valuable information provided by these financial reports!
Make your Business Client-Forward and Investment Ready
Let’s be honest - having a business bank account adds legitimacy to your business. You may need to share financial information with clients or vendors in order to be paid or to pay them. Being able to provide information for an account under your business name shows that you’re more established, and it’s even more important when it comes to investors. Who knows when a perfect investment opportunity could come your way? Being able to show up to date and accurate financial data could be the defining factor in whether or not an investment comes your way. Plus, maintaining the corporate veil will make investors feel more confident by reducing their liability risk.
Feeling empowered to call up your bank now? We hope so! Just remember that separating your finances is just the first piece of the puzzle.
To maximize your success, work with us to use your financial data to your advantage and make your business stronger! Ready to make that jump?
or Schedule a free Discovery Call here: https://bookus.page/Fireside/judahkosky/discovery-call