You've been cautioned about mixing business with pleasure, but what about blending your company's finances with your own? It's tempting to assume that there's no harm in this, since all the funds will come back to you in the end anyway. But as any tactical money management expert would testify, there are several good reasons why you should reconsider this move.
Ever spent hours combing through your bank statements when filing your tax returns? This is often the result of mixing both personal and business funds in the same account. In such a case, it becomes hard to keep track of deductible expenses, which in turn creates the risk of inviting tax auditors. Such headaches are best prevented by splitting finances and proper book-keeping.
The need to split your finances extends to your professional image. Customers and suppliers have to feel confident about how you run your company for them to take you seriously. In other words, the lack of a proper boundary between the business and its owner will make others start doubting your professionalism. Fortunately, correcting this is as simple as setting up a dedicated business account.
What would happen to your personal finances if one of your creditors were to file a lawsuit against your business? While it's true that registering the entity as a limited liability corporation can reduce your personal liability, this protection isn't always guaranteed. There's a legal doctrine known as 'piercing the corporate veil, ' which means that courts can disregard your entity's status if your funds are co-mingled. What's the point of having a corporate shield if it will fail you when you need it the most?
Whether it's the seasonal working capital injection or a long-term loan, funding from outside sources will be vital to the growth of your company. Keeping finances separate means your business will develop its own credit profile, which will come in handy when you will be dealing with lenders. It will also save you a lot of work when demonstrating your firm's financial records.
In an ideal scenario, a quick scan at your bank statements is all you'd need to figure out how your business is fairing at any time. This is easier said than done, but what's indisputable is the fact that it'd take at least a week to do the same if your finances are merged. Remember that it's your responsibility to spearhead decision making and maintain forward progress. Knowing that you don't have any personal transactions interfering with your accounts will not only make this easier, but also lessen the workload for your accounting department.
The lack a clear distinction between your financial life and that of your company could be putting both your lives at risk. This is due to the increased likelihood of using your personal resources to plug gaps in your company's income or vice versa. Either way, it's virtually guaranteed that you'll drain yourself to the point of collapse.
The idea of managing your cash in the same place as your firm's finances might sound convenient, but it's one that's littered with numerous pitfalls. Setting up a dedicated bank account for your business will be a step in the right direction as far as your success is concerned. While this means you'll have more accounts to keep track of, the long-term benefits of this move will more than make up for your efforts.
Ever spent hours combing through your bank statements when filing your tax returns? This is often the result of mixing both personal and business funds in the same account. In such a case, it becomes hard to keep track of deductible expenses, which in turn creates the risk of inviting tax auditors. Such headaches are best prevented by splitting finances and proper book-keeping.
The need to split your finances extends to your professional image. Customers and suppliers have to feel confident about how you run your company for them to take you seriously. In other words, the lack of a proper boundary between the business and its owner will make others start doubting your professionalism. Fortunately, correcting this is as simple as setting up a dedicated business account.
What would happen to your personal finances if one of your creditors were to file a lawsuit against your business? While it's true that registering the entity as a limited liability corporation can reduce your personal liability, this protection isn't always guaranteed. There's a legal doctrine known as 'piercing the corporate veil, ' which means that courts can disregard your entity's status if your funds are co-mingled. What's the point of having a corporate shield if it will fail you when you need it the most?
Whether it's the seasonal working capital injection or a long-term loan, funding from outside sources will be vital to the growth of your company. Keeping finances separate means your business will develop its own credit profile, which will come in handy when you will be dealing with lenders. It will also save you a lot of work when demonstrating your firm's financial records.
In an ideal scenario, a quick scan at your bank statements is all you'd need to figure out how your business is fairing at any time. This is easier said than done, but what's indisputable is the fact that it'd take at least a week to do the same if your finances are merged. Remember that it's your responsibility to spearhead decision making and maintain forward progress. Knowing that you don't have any personal transactions interfering with your accounts will not only make this easier, but also lessen the workload for your accounting department.
The lack a clear distinction between your financial life and that of your company could be putting both your lives at risk. This is due to the increased likelihood of using your personal resources to plug gaps in your company's income or vice versa. Either way, it's virtually guaranteed that you'll drain yourself to the point of collapse.
The idea of managing your cash in the same place as your firm's finances might sound convenient, but it's one that's littered with numerous pitfalls. Setting up a dedicated bank account for your business will be a step in the right direction as far as your success is concerned. While this means you'll have more accounts to keep track of, the long-term benefits of this move will more than make up for your efforts.
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