Lots of business owners, especially those who are in the first few years of starting up tend to make the mistake of moving business and personal. I know, in the beginning, you are just trying to make sure your business survives, by scaling and growing. However, I cannot stress enough how important it is to separate business and personal funds for several reasons:
Legal protection: Separating your business and personal finances can help protect your personal assets in case of legal issues or financial liabilities related to your business. If you mix your personal and business funds, you risk losing personal assets such as your home, savings, and investments. You definitely don’t want to get caught up in this drama just because you decided not to make a simple switch.
Easier accounting: Keeping your business and personal finances separate can make accounting and bookkeeping easier and more accurate. You can track your business expenses and income separately, which can help you identify areas where you can save money and improve profitability. If you don’t know how your business is doing financially, you can’t actually make the proper adjustments to get the results that you want for your business.
Tax compliance: Separating your business and personal finances can help ensure that you are in compliance with tax laws and regulations. You can accurately calculate and report your business income and expenses, which can help you avoid penalties and audits.
Professionalism: Separating your business and personal finances can help you project a professional image to clients, vendors, grant opportunities, and investors. It shows that you are serious about your business and are committed to managing it responsibly.
In summary, not separating your business and personal funds has so many negatives. It’s not worth it to continue with that practice if that's what you are doing. You have no excuse either, because you can open up a free business account with no minimum balance or monthly service fees from your couch. Literally.
So, in the event that you get audited, are applying for grants, or need to produce financial statements, just remember that MJ told you to separate your stuff. You will either confidently provide documentation or be under a whole heap of stress due to procrastination and laziness. If you want to finally stop putting it off, get started here
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