The Business Fashion Tips Podcast 

Episode 11 – Step 9

Keeping your personal life separate from your business. Step 9 – episode 11

Step 9 in the 10 steps needed to open up a business is making sure you open up a separate bank account, credit card and expense account to use for your business only.

Why is it so important to open up separate accounts like a business bank account and a business credit card and a business expense account and there are many reasons for this. It’s hard when you are an entrepreneur and go into business because you and your business become one. Your business becomes an extension of your. It creates your identity and who you are. But you have to remember that your business is an independent entity. 

#1 – if you get audited by the IRS on your taxes, if everything it together you open up the IRS to examine both your personal and business accounts. So if they came just to see your business, you have to let them into your personal affairs as well. So you just opened up an entire new can of worms for the IRS to explore. 

That also takes up extra worry time because if you just kept it business, and they are only there to audit your business you don’t have to worry about providing them everything about you personally. Blurring the lines of what is your business and what it your personal account allows an IRS agent to look into both you and your businesses accounts.

#2 – It’s so much easier for accounting to keep the business aspects separate from your personal accounts. It is way easier track your businesses cash flow if you keep your records separate. At anytime you should be able to see how your business is doing. Is it profitable? What is bogging you down? It is easier to forecast your businesses future. As you can see in a quick view what expenses were higher one year from the next?  If you ever have a question on a missing check you never need to go through everything, just your business checking account.

#3 – Be professional and add brand identity. Customers and vendors should know they are dealing with a professional business, not some fly by night maybe it’s a business, maybe it’s a hobby fling. Keep it professional. If you want your customers to take you seriously show that you are a business that is in this to win it.

#4 – From a liability standpoint keeping your accounts separate is important.  If someone sues you and you have your business accounts mixed up with your personal accounts, they can go after your personal assets. You need to keep personal assets out of your business.

#5 save time which means saving $.  Time is money is a brilliant phrase that Benjamin Franklin came up with. There is a reason why he is on the $1 bill. 

#6 establish credit. Your business may need to take out a loan one day and if you can show it is making a profit and has it’s own assets you may be able to take out a loan for the business without your co-signature. That way if you business goes down, the vendors you owe money to cannot go after your personal assets. If you borrow funds try to borrow them against your business and not personally.

#7 if you ever try to sell your business the interested buyer will want to see 5 years of your business finances (not your personal finances). 

How to keep your business  & personal finances separate

*- An easy way to keep your books accurate is to invest in an accounting program like Quickbooks. Every time you make and expense or bill a customer it will go right into this program. You can even send invoices via email with your company logo on it from this program. It will allow you to keep separate accounts.

*- Open up a business credit card and only put business expenses on this card.

*- Keep all your receipts. Match up your receipts to your business credit card and scan them into your computer.

AND REMEMBER, Reduce your risks and don’t mingle your finances.