It’s so much easier when you keep your business and your personal life separate and well organized. Read more from tax expert Barbara Weltman on why you need to separate your business finances.
Take a Salary
The owner should set herself up with a salary. If it’s a corporation or Subchapter S, the owner should be made an employee. For a sole proprietor, she could simply set up a regular withdrawal or transfer every two weeks into a personal account.
This enforces the separation of funds. Taking a salary is the main way to break the habit of dipping into business accounts for personal expenses at irregular intervals.
Take Profit Distributions in Lump Sums
Do not take them as irregular ATM withdrawals or by Surrey finance loans personal paying personal bills here and there. It makes planning much harder. Plus, the funds are more likely to get frittered away instead of being earmarked for important purposes such as a SIMPLE or 401k retirement plan.
Make distributions a planned event once or a few times a year. Build them into your tax and retirement planning. Make them part of your growth strategy.
Use Separate Credit Cards
It also adds extra steps to your bookkeeping. You can’t simply download your monthly transaction history into your accounting software and have all business charges in one place.
Apply for a business credit card as soon as you have revenue coming in regularly. It will also help establish a separate credit history for the business.
Keep Good Records for Taxes
Good recordkeeping helps you stay out of tax trouble. Often it isn’t bad intent that gets small business owners into hot water with the IRS and other taxing authorities. Rather, poor bookkeeping and lack of documentation cause unnecessary problems. It’s a forced error.
Good tax planning becomes difficult when you don’t have a clear financial picture. Leggi tutto “Just like with your bank account records, you have to manually sort through them”