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Helpful Tips Before You Start Your Own Business

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As many of my readers already know, I left corporate America about 18 months ago to start my own business. Truth be told, my wife started the business two years prior and thankfully had seen some good growth. Looking back on that I see a few things that would’ve been helpful to know before taking the plunge. If you’re looking to start your own business, learn from my tips before you take that final step.

Keep Your Personal and Business Finances Separate

 

Life is hectic, right? Why not keep your business and personal finances together then? That might seem easier, but the fact is that having a commercial banking account for your business can help you solve a number of issues. Mainly, having a business banking account will allow you to see what exactly the fiscal health of your business is by seeing the inflows and outflows of cash.

This is also not to mention the fact that it’ll make life much simpler come tax time. Starting your own business is stressful enough that you don’t want to add additional stress caused by having to deal with potential issues created by co-mingling funds.

Starting Your Own Business Brings up Legal Concerns

 

If you’re wanting to start your own business, then another area to look at is how you can mitigate any potential legal issues you may have to deal with down the road. This will vary by business type, but you’ll want to look into what kind of corporate structure will serve your business best as well as any insurance coverage.

Believe it or not, having a business banking account can also help with this as it could potentially shield you from personal liability in regards to personal funds if your business is ever held at fault. The last thing you want is to have personal funds be at risk because you did not take the proper steps to keep your finances separated.

Be Prepared for Emergencies

 

As one who has seen the ups and downs of running your own business you never know what will happen. Again, this will depend on the business type, but you want to be prepared to cover costs associated with your business. It isn’t all bad though as you could have excess cash flow via working capital financing from the business you don’t want simply sitting around and want to use it to help grow your business. In those cases, a business savings account can help you keep funds separate from your day to day business funds. These funds can be used for various items from covering regular expenses, to being used to help expand your business or even just to simply allow you to build up resources that can be used to invest on behalf of your business.

The key in all of this is to be financially prudent with the resources of your business just like you would your own personal resources. While having all of your resources in one bucket may seem easier or more simple, it really only benefits you to keep finances as separate as possible.

 

Photo courtesy of: Tax Credits

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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally. I'm also a freelance writer, and regularly contribute to GoBankingRates, Investopedia, Lending Tree and more. If you're wanting to learn how to monetize your blog, check out my blog coaching services to see how I can help you take your site to the next level.

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8 Comments

  • Romona (@monasez) says:

    Great tips on business accounts. Recently I’ve been trying to decide if I wanted my business income to go directly into my bank account just until I get established. But maybe I will open another account.

    • John says:

      I would highly encourage you to open a business account Mona. It doesn’t take much time and it’s worth it to mitigate any risk. Separate is best in my opinion. 🙂

  • Mrs. 1500 says:

    How funny the timing of this post. I attended a business seminar at our local library last night. It was presented by a tax attorney who specializes in asset preservation. He said that should you be sued, you must show an attempt to keep your personal and business funds separated, or you risk losing the asset protection that a business license allows you, meaning that if you co-mingle funds, your personal assets could be taken in the event someone successfully sues you. Romona, get a business account.

  • As a former banker who use to help with commercial accounts, I cannot stress the importance of NOT co-mingling your assets between your person and business. Keep it separate. Keep it safe.

  • That’s true. You must be prepared for emergencies because if you don’t have the money to fund it, then your business may encounter more problems. Great tips!

  • When I started my business, one of the first things I did was open a business account and use a separate credit card for purchases. It was, as you said, as much about tracking the business income/expenses separately. I’m a sole trader so it’s all considered personal debt.

    Now I’m starting a freelance business as well, I’m trying to decide whether I should open a further account – seems like it’ll be too many to manage and I’m not earning heaps at the moment. I’m tracking my income/expenses carefully so I can claim and tax time. I’ll see how my income goes this year whether it’s worth having a separate account before I go freelance full time.

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