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Starting a company has been described as similar to raising a child. So it may seem natural to consider the business as an extension of yourself. However, to be successful, it is better to separate your personal life from the new business to avoid problems later. Combining your finances with those of the company could cost more than you’re prepared to spend and make you responsible for the company’s financial problems.
Make a Separate Budget
Start by making a separate budget for your company. If you are funding the startup, set up an account that is distinct from the money you personally earn and spend each month. While it’s fine to give yourself a paycheck as owner or operator of the business, it is not recommended that you combine personal and professional income and expenses overall, as you could become financially overextended. Many business startups have forced their owners into bankruptcy by taking this route.
Open Business Bank Accounts
Keep your personal banking apart from your company accounts. Most banks offer business checking accounts with perks like free checks in some cases. Discuss your new company’s needs with your bank or several financial institutions to find the best account services with minimal service fees and possible incentives. A business savings account is also a good idea to set aside funds for emergencies. When your company begins to earn profits, you may want to invest some of that income in a safe, low-risk investment account with your bank or an investment firm.
Develop a Professional Company Brand
To keep your business distinct from your personal identity, create a professional image and a company brand. This will not only help to protect your individual financial interests but also market your business to a specific market niche. Working with an advertising company and a graphic design artist, you can develop a business name, a logo, and a slogan if desired. This will help to promote your business as a professional, independent entity.
Avoid Mixing Personal and Business Documents
Keep clear business-related documentation that does not mingle with your personal records. Deposits, checks, purchases, taxes, and insurance are some of the expenses that should be maintained distinct from those pertaining to you as an individual. If you operate a home-based business, you may be able to include Form 8829 with your personal income tax return. Discuss your business setup with an accountant or tax expert.
To protect yourself and your new business, operations should distinguish between your role as an individual and as the company owner. Take steps to separate your own finances from your business’s wherever possible.
Anita Ginsberg is a freelance writer from Denver, CO. She studied at Colorado State University, and now writes articles about health, business, and family. A mother of two wonderful children, she loves traveling with her family whenever she isn’t writing. You can find her on Twitter @anitaginsburg
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