Business owners carry a lot of risk. How much of that risk do you want to carry over into your personal life? When it comes to your finances, you should never mix business with your personal finances. This can lead to unwanted messes and may even put your personal assets at risk when it comes to bankruptcy and dealing with creditors. If you want to avoid personal bankruptcy while running a business, then you are going to want to follow these steps to keep your finances separate.
Establish a Legal Entity
In order to protect your personal assets, you need to establish your business as a separate legal entity. You will want to establish yourself as an LLC, S Corp or a C Corp. When your business is a separate entity, you protect your personal assets from lawsuits, business debts and other losses.
Open a Business Checking Account
When you’re serious about separating your finances, then your bank accounts should reflect that. You need to open up a checking account for your business. Then, make sure that you remain strict on what it is used for.
Obtain a Business Credit Card
Business debt cards can stop you from using your personal account when it comes to business transactions. When you have a business credit card, there is a clear separation between your personal and business expenses. Business credit cards also help you increase your credit score.
Keep Your Receipts Separate
In order to keep your finances separate, you should keep the receipts separate. Make sure that you keep your business receipts organized in their own folder or file. Not only will this keep your finances completely separate but it also provides you with information if the IRS ever wants to look at your accounts or receipts.
Pay Yourself a Salary
While you are the boss, you need a paycheck too. Make sure that you pay yourself a check every month. You would write this check from your business account and transfer it into your personal account. Then, you should always act as you would if you were working for another person. You do not want to pay for personal needs from your business account. If you run low on money, do not increase your pay or dip into your business account. Instead, wait for the next paycheck.
As a business owner, you know the risks. Even if you are willing to take the risk with your business, it does not mean that you want to risk all of your personal assets or risk filing for personal bankruptcy. If you’re worried about your personal assets and in the middle of filing for bankruptcy, contact a bankruptcy lawyer in Clearwater, FL.
Thanks to The Law Office of Michael A. Ziegler, P.L. for their insight into bankruptcy law and separating your business and personal assets.