How to Separate your Business Finances from your Personal Finances

As your business grows, your money grows. And as your money grows, it is imperative that you keep both your business and personal finances split. I've noticed this happening way too often with newer businesses and it makes it harder for them to stay a float. I even witnessed it happening to myself quite a few times, so I know how easy it can be to intertwine the two. But, no matter how big or small your business is, you should be treating it like a viable entity.

I know this can be a difficult task for small businesses with a one-man team. But if you're anything like me, keep reading to find out some easy ways to keep your business finances from mixing with your personal coin.

Open a business checking account

It is never too early to open up an account for your business. Being able to keep track of all of your business spending and having everything in one place makes it easier for you to file during tax season. I know some banks require you to have a minimum amount of money in order to open up an account, so I suggest inquiring about that with whatever bank you decide to go with.

Having a business account, allows you to have a physical card to easily make purchases on the spot and it gives you the option to withdraw money from any designated ATM.

I currently don't have a business account but will be opening one up within the next couple of months. I have been using Paypal to keep track of my business earnings. I create invoices for each client that I work with and keep them in a separate folder. Now, when I spend my own money on my business, I make sure I keep the receipt so that I know how much of my personal money is being spent. This leads me right into the next topic.

Keep ALL your receipts and separate them

As a small business owner, I make sure I keep all of my receipts for purchases that were made for my business in a separate folder. This allows me to keep up with business expenses and yet again, prepares me for tax season. When filing taxes as a business owner, you can write off your expenses to get most of your money back. You can also calculate your monthly expenses and predict how much you might spend the following months, that way you can plan ahead.

I personally like to keep each of my receipts but it's okay if you don't. Generally, you don't really need to keep receipts for items totaling under $75, unless it is a lodging expense which is rare.

Put your business on the map

Running a small business on your own is hard and sometimes things don't always go the way you imagined they would. So you shoukd prepare for the worst and obtain your LLC.

By taking your business to the next level and turning it into a limited liability company (LLC), it will then help to protect your personal assets from business debts, losses and lawsuits. Creditors are then foreclosed from seeking your personal assets which is a PLUS.

I obtained my LLC for my business and the process was quite simple. Want to make it official? Check out Legalzoom.

Obtain a business credit card

Opening a business credit card allows you to stop using your personal credit card for business expenses. Just like any other card, a business credit card allows you to build a strong business credit, if you pay your bills on time. And when I say on time, I mean early. Paying your bills on time shows that you are reliable and can manage your money. It also helps you to secure better interest rates on loans that may come in handy when starting your business.

I currently just have one credit card but will be obtaining one for my business very soon. As a wardrobe stylist, I have to make a lot of purchases for clients before actually being compensated. So for me, it makes sense to have a form of payment to used temporarily and then pay it right off in an instant.

I never said this would be easy, but we have to start somewhere right? Even if you haven't started yet, plan to take the proper precautions in 2018. This may seem like a lot but, you can take baby steps and separating your business and personal finances is definitely one step closer!