Do you find it difficult to separate personal from business finances? There’s nothing more important than keeping your personal and business finances separate. Doing so helps you become more efficient, find certain tax breaks, and avoid certain legal problems.
We’ve created this simple guide to help you manage your finances. Keep reading to learn everything there is to know.
1. Apply For An Employer Identification Number
If you have a business, one essential task is to obtain an Employer Identification Number, which is from the IRS or Internal Revenue Service. An EIN is a nine-digit number that helps distinguish your business from other businesses. Having an EIN allows you to keep your personal and business finances separate. It also makes signing up for business accounts easier and allows you to file taxes properly.
Applying for an EIN is free, and it’s easy to do. All you need is to complete an online form from the IRS website. Once you’ve completed the form, you will receive your EIN immediately. Make sure to apply for an EIN for your business today!
2. Open A Business Checking Account
Separating your personal and business finances is a crucial step to set you up for success. One of your priorities should be to open a business checking account. A business account ensures that you only use it for business-related transactions. This way, your personal finances will not be co-mingled. You want to be able to see clearly where your money is being spent and what income is coming in.
Also, a business checking account makes it easier to analyze income and expenses. You can reduce your expenses and increase income for the business. Make sure the account is a low-fee account and that you keep up with all deposits, withdrawals, and transactions.
3. Separate Your Receipts
Separating your personal and business receipts is essential for maintaining financial order. Creating separate wallets or envelopes for your personal and business purchases can be helpful for organizing your receipts. Whenever you make a purchase, store the receipt in the appropriate wallet or envelope and update your records accordingly. It’s also recommended to keep all receipts for tax purposes as well, regardless of whether the expense was personal or business in nature.
For digital receipts, use a dedicated email address for business-related transactions and store those emails in a dedicated folder. If you pay in cash, consider taking a picture of the receipt for your records. Taking the necessary steps to keep your personal and business finances separate will help you to keep business records accurate.
4. Manage Your Personal And Business Finances Better
Maintaining a clear distinction between your personal and business finances is a crucial step for managing a business. Taking the time to understand the best solutions for this helps to ensure that your business is financially successful.
Take action now and set up separate accounts, budget and track your finances, and create purchase policies to ensure proper separation between business and personal finances. Did you find this article helpful? Check out more of our informative blogs!