Separating Personal and Business Finances

Separating Personal and Business Finances

When starting a new business there are a number of reasons why you should separate your personal and business banking, these include:

Part-time/Hobby Businesses
The IRS has strict rules that stipulate that only businesses can deduc

t business expenses. If your business ?looks like a hobby? and you use a personal bank account for your business expenses it can make it harder to convince the IRS that you are operating a legitimate business.

Filing your taxes
When it come time to file your income tax return you will need to schedule your income and expenses for your business separately from your personal transactions. It will be more time consuming distinguishing your business from personal income and expenses if they are co-mingled on a single bank/credit card statement.

Audit trails
The IRS does not require that you have a separate bank account for your small business, but it does require that all records be accurate, complete, permanent and show a clear record of all business related income and expenses. Establishing a separate business account will provide you with a dedicated statement that is a clear record in the event of an audit.

Professionalism
Re

ceiving checks from clients in your personal name can convey that your company is a part?time venture and that you do not take it as seriously as your clients do. The costs of a business checking account are far less than the benefits to your business. Fees are usually tax deductible as an expense. Opening a business account with a bank earlier can help you later if you need financing.

Establishing Credit
Many entrepreneurs finance their business start-ups using their personal credit cards, savings or home equity. But the longer you self-finance, the longer you delay establishing business credit and taking advantage of business loans.

Small business owners seeking credit need to carefully weigh and consider their options. Applying for credit should be a well-calculated and thought-out process.
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Lone Star Merchandising Services, with over 15 years of retail experience, offers experienced merchandisers for scheduled resets, remodels, and category updates. We provide services in all retail outlets throughout Texas, Oklahoma, Arkansas and Louisiana.

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