Are you self-employed? Are you making some money with a side-gig? If so, you need to be keeping your business and personal finances separate. Combining the two will make it very difficult for you to properly file your taxes. This could result in paying hefty fines or missing out on money saving tax-deductions. If you don’t know how to separate the finances, do the following.
Open a Business Account
An important part of keeping your finances separate is to have the funds in separate bank accounts. A business account gives you several benefits. You can apply for a business debit and credit card that will help you with tracking your deductible expenses. You will be able to use this account to send invoices to your clients without having to give out your personal information. You will also need a business account if you are going to try to apply for a business loan.
Register an LLC
Before you can have a business account, you are going to need a business entity. One of the easiest business entities to form is an LLC. Registering an LLC requires you to pay fees to start and maintain it. The fees differ depending on where you live. In some places, the fees are only about $150. In other places, the fees can cost thousands of dollars. Having an LLC will help you avoid problems like double taxation. It will also help protect your personal funds and assets if someone tries to sue you. In the case of a lawsuit, only the funds and assets of your LLC can be taken by someone who has a grievance with your business conduct.
To make your life simple, it is very important that you keep detailed records of everything that you are doing. This will be much simpler if you don’t deal in cash. Using a credit or debit card for all your business transactions will allow you to keep easy records of everything that occurs. Make sure that all your purchases are separate. You should never purchase business supplies with your personal card or personal supplies with your business card. If you are buying both at the same time, make sure to pay for them in two separate transactions. This may be a hassle, but you will be glad you did if you ever face an audit.
Financial record keeping is no joke. You don’t want to brush these sorts of things aside. Doing so could ruin you. If you are going to run a business, you need to educate yourself on all the applicable rules and procedures. Taking the time to do this properly will protect your investment in the long term.
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