Separate Personal and Business Expenses

Separate Personal and Business Expenses

Create a Business Checking Account

This should be your first step when starting a new business, and you should get into the habit of depositing income here and paying bills from this account as well. If there is ever any question as to whether you are running a hobby or a business, the IRS will first look to see if you’ve opened a separate account, which will help them decide whether to grant you that all-important distinction, so you want to make things as simple and clear as possible for yourself from the beginning.

Open a Business Credit Card

If you are a new business owner, it can be difficult to get approved for a credit card, but apply anyways, it’s no use wondering “if”. And if you get denied, continue apply especially as your business grows. Little secret about doing this is that business credit cards are the only credit cards on which interest accrued is deductible as a business expense.

Pay Yourself a Salary

Writing a check from your business checking account to yourself for the same amount each month will help you maintain a sustainable business budget. It can be easy to let money slide around between personal and business accounts but paying yourself a set salary will help maintain the necessary boundaries.

Maintaining clear lines between your business and personal expenses doesn’t need to be challenging. Setting up a clear distinction between your personal and business finances, and consistently keeping them separate, is fundamental to your success. If you are a new business owner, start things right from the outset. If you have been in business a while, take a day or two to get things set up for the long haul. It will save you tons of headache and make it easier for you to become successful in your business.

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