March 19, 2019Share:
There are numerous legal, tax compliance, and record keeping complications that can arise from not properly keeping personal and business financial activity properly separated.
Following are five tips we have learned to help you separate personal and business financial activity:
1. Consider establishing an LLC or incorporating.
One good way to separate things is to establish the business’ intent to exist and do so legally.
One way to protect against hobby-based tax challenges is to document profit motive in the business’ founding documents.
2. Create a separate business bank account and business credit card.
The bank account and credit card are established for the business and then should be used that way. Nothing personal. Business only.
3. Treat it like it’s not your money.
If you were the manager of someone else’s business or nonprofit organization, would you feel comfortable spending someone else’s money for various expenses of the business?
4. Reimburse yourself.
Keep proper documentation of all personal reimbursements of expenses including the detail of the expenses, the business purpose of the expenses, and proper approval of the expenses.
5. Pay yourself a reasonable salary.
If someone else hired you to run the business, how much would they pay? Pay consistently and timely.