So, you’re thinking of starting your own business? Tired of working for someone else, and want to strike out on your own? It’s an admirable idea, but you need to think of a lot of things before you get started – including how you’ll handle your finances.
It’s very important to avoid combining personal and business accounts. It can be very tempting to deposit business cheques to a personal bank account or to charge business expenses to a personal credit card, but these actions can put you at risk. At tax time, it can be hard to sort out what is a business expense and what is a personal expensive – and if you deduct an expense you shouldn’t, it can cost you.
Here are some tips to help keep you on track:
- Have separate bank accounts and credit cards for business and for personal use. Depending on your bank, you may find that there are perks to the business credit cards or accounts you can can’t get on personal credit cards and accounts.
- Keep good records. Make sure you keep track of charges you make for business purposes, since these can be deducted on a tax return.
- Consider professional advice. You may want to consult with a business banker, and tax and legal professionals before you start your small business.
Have you ever started your own business or thought about it? If you have run your own business, what was something you wish you’d considered before you started it?
This are all great tips! Make sure you keep expenses and income separate.
Michelle recently posted..Should I still be anonymous?
Yup. Sounds simple, but it can get complicated..
Great tips. My wife and I run our own business and keeping records separate are very important. It is also key to get help from pros like a tax person. I always did our taxes, but when we started our own business the just got too difficult. He’s definitely worth the cost and has saved us a good bit of money.
John S @ Frugal Rules recently posted..Blogging Tips From a Beginner
Glad to hear it! If your situation is simple, doing your own taxes is fine – but with a business or anything like a rental property, it’s best to get some help!
I totally agree. Since I started my website I have kept everything separate. I use Quicken to track transactions and profits and it works really well. Filing for taxes last year was a breeze.
Miss T @ Prairie Eco-Thrifter recently posted..Non-Financial Investments For Your Future
Cool. I haven’t gotten there – but I don’t make enough yet
to worry about it!
I agree- you need to keep good records! Since we own rental properties, we have to keep track of all of our financial transactions and purchases. Luckily, Greg does well at our books and is amazing at doing our taxes.
It’s not my strong suit.
Holly@ClubThrifty recently posted..Professional Sports: The Opiate of the Masses
Yes, my Dad has ownership in rental properties, and he has someone do his taxes – just makes life simpler. Glad to hear you’ve got your own tax expert.
I have a great accountant, but more importantly I have a solid bookkeeping system at home, as I file away expenses/purchases by quarter. It’s easier to manage come tax time. In order to keep my business purchases separate, I make all the purchases FOR BUSINESS ONLY via a business CC.
Eddie recently posted..Money Mistakes in Your Relationship
I have bad feelings about starting my own business…at least, the kind where I’d have to put in a lot of money up front. My father left a good paying job to try to start his own business, and it didn’t work out. I’ve been kind of leery about the whole thing since then.
CF recently posted..Our early retirement plan
Yeah – it’s a lot tougher than people think. I definitely don’t have the right personality for it.
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Running your own business is very hard. I worked as an independent contractor for a couple of years and the amount of stuff you have to do just to stay in business (not find new business, but stay open!) is ridiculous. Managing two bank accounts was something I don’t want to do again.
Weasel recently posted..Should You Rent to Own a Home?