{"id":847,"date":"2019-07-18T12:44:29","date_gmt":"2019-07-18T16:44:29","guid":{"rendered":"https:\/\/fluentricciardi.com\/?p=847"},"modified":"2022-01-27T12:45:49","modified_gmt":"2022-01-27T16:45:49","slug":"mixing-personal-and-business-finances","status":"publish","type":"post","link":"https:\/\/fluentricciardi.com\/mixing-personal-and-business-finances\/","title":{"rendered":"Mixing Personal and Business Finances"},"content":{"rendered":"
Don\u2019t Mix the Personal and the Business; Keeping Finances Separate<\/strong><\/p>\n When you launched your business you might not have paid much attention to keeping your personal and business finances separate. If a vendor needed to be paid you grabbed the closest checkbook and wrote out a check, even if it was a personal account. It\u2019s not a big deal since it\u2019s all yours, right?<\/p>\n <\/p>\n Wrong. Keeping personal and business finances separate is actually quite important. Here are the reasons why it matters, tips on keeping finances separate, and what to do if you\u2019ve comingled funds in the past.<\/p>\n Be Ready for Tax Season<\/strong><\/p>\n If you use the same checking account to pay both personal bills, such as your mortgage, and business expenses such as rent, you\u2019re making it harder on yourself come tax season. If your expenses are combined, you would have to go through each bank or credit card statement line by line to identify which expenses can be deducted and which were personal.<\/p>\n This also could raise some confusion about whether or not you\u2019re operating a separate business which allows you to take deductions. The IRS will only let you claim a business loss for three years before classifying it as a hobby. If you\u2019ve yet to break even and aren\u2019t keeping separate accounts and records you\u2019ll have a harder time arguing for business status with the IRS.<\/p>\n Keeping finances separate ensures that you don\u2019t miss out on any tax deductions.<\/p>\n Saves you Time<\/strong><\/p>\n Keeping your finances separate not only helps you be prepared for tax season, it saves you time. It will be easier to match receipts to bank statements to have support for your accountant, and preparing your taxes will take them less time.<\/p>\n Entering transactions into whatever accounting system you use and reconciling your bank accounts will also be a quick process. You won\u2019t have to take the time to exclude certain charges or classify them as personal. If you use a business credit card, the interest is tax deductible. But if you\u2019ve charged personal expenses to the card you\u2019ll have to break out the interest.<\/p>\n Builds Business Credit<\/strong><\/p>\n One of the ways to build a business\u2019s credit is to have business checking and savings accounts. There are many benefits to building business credit separate from your personal credit, particularly if you have poor personal credit.<\/p>\n The three main credit bureaus track a business\u2019s credit based on your credit obligations, legal filings, and details on your company\u2019s background. Similar to a personal score, details such as your\u00a0credit utilization ratio<\/a>, late payments, and balances are used to calculate your score. But because it\u2019s separate from your personal information you could build a business credit score that\u2019s higher than your own score.<\/p>\n