Mar 18, 2021
Today’s topic is an important one and one that you simply can’t ignore as a small business owner. Separating your business and personal expenses is a crucial aspect of running a successful business and plays a huge role in the health of you, your employees, and your company. The longer you commingle things, the harder it's going to be to separate them. Let’s talk about it.
Before you get started, make sure you’re surrounded by professionals who can help you transition to a business tax ID, or if you’re using a personal social security number, your growth, how much your making, and other important aspects. The point is, you don’t know what you don’t know, and you don’t want to make an expensive mistake.
The first step you can take to separating your business and personal expenses is to have separate bank accounts and credit cards. This is super easy if you have a business that you have already established, that has a separate tax ID number that you can apply for credit cards and bank accounts separately Not only are you building up credit for your business, but it also makes it much easier for your bookkeeper or tax preparer as your business grows.
You also want to make sure that you have a separate budget for your business. You can just write it down in your notebook, keep a spreadsheet, whatever works for you. The point is, it’s easy to get sucked into purchasing all the bells and whistles for something for your company, and pretty soon you've created a pile of expenses and may not even realize it because it's all been coming out of your personal account.
Ensure that you keep a separate receipt collection organized. Either manually in a folder or digitally with something like QuickBooks, where you scan your receipts, keep them in order because it can get out of hand really quickly. Filing taxes has become so much easier that way.
When talking with your accountant, you might also want to mention when's a good time for me to start taking a salary. What type of salary? Should I be giving myself W2 income? Should I be giving myself 1099? What does this all look like? They're the best persons to give you those recommendations.
Finally, set a date that you’re going to do all of this. You’re going to have to, so rip that band-aid off and get it done.
Key Takeaways
- Make sure you’re surrounded by professionals who can help you transition to a business tax ID, or if you’re using a personal social security number, your growth, how much your making, and other important aspects. You don’t know what you don’t know, and you don’t want to make an expensive mistake.
- Have separate bank accounts and credit cards. This is super easy if you have a business that you have already established, that has a separate tax ID number that you can apply for credit cards and bank accounts separately Not only are you building up credit for your business, but it also makes it much easier for your bookkeeper or tax preparer as your business grows.
- Have a separate budget for your business. You can just write it down in your notebook, keep a spreadsheet, whatever works for you. The point is, it’s easy to get sucked into purchasing all the bells and whistles for something for your company, and pretty soon you've created a pile of expenses and may not even realize it because it's all been coming out of your personal account.
- Ensure that you keep a separate receipt collection organized. Either manually in a folder or digitally with something like QuickBooks, where you scan your receipts, keep them in order because it can get out of hand really quickly. Filing taxes has become so much easier that way.
- Set a date that you’re going to do all of this. You’re going to have to, so rip that band-aid off and get it done.