Separating Business and Personal Finances
Separating your personal and business assets offers you a better sense of how your business is doing, and makes it easier to handle your taxes and get additional financing when you need it. And, should you ever come under IRS scrutiny in the form of an audit, the process will be made much easier.
Some of the keys to building walls between business and personal finances include:
- Keep separate accounts—Among the first things you should do is open separate checking and savings accounts for the business. Not only does it help keep you financially in line, but it lets the IRS know that this is more than just a hobby. If you use Quicken, QuickBooks, or Microsoft Money, you may want to create two separate systems: one for personal and one for business. Separating those functions also ensures that, at year-end, all your income and expenses will be in one place, making record-keeping and tax filing easier.
- Use a business credit card—Similar to a separate checking account, a credit card will aid in record-keeping and give you something to show the IRS if you're audited. A business credit card may also get you a tax deduction, as a business credit card qualifies as a deductible business expense.
- Choose a structure—Establishing your business as a limited liability company (LLC) or an S Corp. offers a level of liability protection, as well as potential tax advantages. Speak with your attorney or financial advisor about the structure that makes the most sense for your business.
Having a checking account, credit card, and record-keeping software exclusively for business can assist in easing tax filing and can help you keep your own accounts straight.
Sources: "Keep Your Business and Personal Finances Separate," Entrepreneur
Salem Five Resource
Access Your Finances 24/7 with Web Cash Manager
Salem Five Web Cash Manager gives you access to your finances whenever you need it. And the service helps you streamline your cash management by allowing you to: concentrate, disburse, or transfer funds between accounts, inside and outside the bank; pay most state and federal taxes automatically ; offer employees direct deposit of payroll; pay vendors electronically; and even do it all with your mobile device.
Learn more about Salem Five Web Cash Manager.