Business and personal funds are two different things. Many small businesses make the mistake of keeping both the funds in one account. If you plan to give your own assets and credits the best protection, you should always separate your personal finances from business finances. A business should be treated like a business while looking after your personal finances separately. Whether it is business taxes, tax problems or IRS trouble, you will be able to avoid all these problems and many more by separating your personal and business finances from day one.
There are multiple benefits of keeping your personal and business funds in separate accounts. What you need to do is find out how exactly you can separate both these finances in a proper manner.
Tax professionals or tax consultants will tell you about all those benefits that separating your personal and business finances will bring. Here is a quick look at two of the key benefits of funds separation.
One of the biggest benefits of using a separate business account is the ease of doing your business taxes. If you plan to avoid tax problems, the first thing you need to do is keep track of all your business expenses from day one. This is exactly where the role of a separate business account comes into play. A separate account for business funds makes it easy for you to monitor where money is coming from and where it is going. Whether it is office expenditures or purchases you do for operational and inventory needs, you need to maintain the record of every receipt. This is how you can make filing your taxes hassle-free.
Just like it is important to keep your business funds in a separate account, you need to safeguard your personal finances as well. It is a bad idea to use your personal expenditures to back up your small business or entrepreneurial ventures. If you practice such things, you will face many kinds of difficulties in the future including tax problems and IRS troubles.
In the first few years of setting up a new business, many entrepreneurs use personal guarantees to acquire loans and leases. In some cases, doing so might be unavoidable. But as your business grows and builds a foundation, you should avoid using personal guarantees as much as you can.
For more details on why separation of these two funds will help you a great deal, feel free to reach out to Bronx Tax Services and talk to one of our highly experienced tax professionals or tax consultants.
If you are an entrepreneur or new small business owner, you may not have a fair idea of how to separate personal and business funds. For your help, we have listed below some of the most useful tips that you can use to make sure both the funds remain separate for your peace of mind.
An Employer Identification Number (EIN) is a unique number that the IRS assigns to your company. Once you have received the number, you can use it when filing your business taxes. Not just that, you will need this number to open a business account, incorporate your business and many other things.
Therefore, applying for an EIN is the first step of separating your personal and business finances. An EIN number will eliminate the need for using a Social Security number for business-related matters.
The next step after receiving your EIN is to incorporate your business as a C Corp, S Corp or LLC. Setting up the type of your business makes your business a separate entity from your personal finances.
Once your business becomes a separate legal identity, it also safeguards your personal finances and assets. This means that business debts and lawsuits will not take a toll on your personal assets anymore. Plus, incorporating your business will also help you file your business taxes separately. If you need help with your business taxes or any other tax help, you should head over to our tax office in and near Bronx and speak to one of our highly competent tax professionals.
As soon as you have a separate bank account for business, you have drawn a clear line between business and personal funds.
When it comes to opening a business bank account, you can either open a business checking account or a savings account. At Bronx Tax Services, we suggest you open a business checking account. Having a dedicated business account will make it easy for you to collect invoice payments, pay bills and deposit cash. As a result of this, you will not need to use your personal bank account for business purposes. The IRS will also be notified that your venture is a legal business entity and not something that you do as a part time project or as a hobby.
Instead of using a personal credit card for business needs, you should apply for a business credit card. Obtaining a business credit card helps you build business credit that will make a big difference.
One of the main benefits of a business credit card is that it helps you build a credit history for your business. You cannot do this with a personal credit card. Once you have this credit card, you will be able to increase the efficiency of all your business-related activities. Using a personal card for business expenses will intermingle things and create issues in the future. Therefore, apply for a business credit card so that you can separate your business funds.
Hopefully, you have understood by now why it is so important to maintain two separate accounts for your personal and business funds. These tips and strategies will help you achieve this in a proper manner and streamline your business operations while also protecting your personal assets. If you still have a question or need expert help with your business taxes or tax accounting, head straight to Bronx Tax Services. Our tax consultants and tax professionals will equip you with more tips on the separation of personal and business finances. Our tax office provides payroll services, bookkeeping services and helps a wide range of small and medium-sized businesses deal with IRS troubles in an appropriate manner.
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