When it comes to having your own small business you need to make sure you do a few things to help keep yourself out of debt, as a business and as an individual. If you already have personal debt you really want to make sure you do something to ensure your business and personal life are separate (as they say, don’t mix business with pleasure).
You may still want to do what you can to get yourself out of debt before launching a business but your personal debt shouldn’t actually affect your business, if you do things right. Here are the ways to make sure that your business and personal money are two separate things.
Have A Business Bank Account
Don’t use your personal account for business matters. You should definitely have a separate bank account for both of these things. If your business has some failures you don’t want it to break your personal bank account, and if you have any personal debts you don’t want anyone to be able to come after your business money to cover it.
Talk to your bank about getting a business only account and what that entails. It can sometimes be easier to work with the same bank for both accounts.
Have Business Specific Credit Cards
You also want to have business credit cards that are strictly for your business, and that you won’t be using at all for your personal shopping. Use them only when paying for things like business cards and office equipment. You may have one of them or you may have many of them.
Your debit card for your business bank account should also only be used for business expenses. The only personal money you spend from your business funds will be considered income you’re paying to yourself.
Keep All Business Separate From Personal
They key is to strictly keep your personal spending and debts separate from your business spending and debts, and vice versa. It’s just a good practice to get into the habit of, even if you’re a freelancer or you’re running your own small creative business. Your business money will be better protected this way.
Plus, if you or your business gets audited or sued for anything those monies will be separate and they will need to simply see the funds from the one they are going after (you or your business).
For a small business you run out of your home and for freelancers that are their work, it can seem difficult to keep your money all separate, but as you get used to it you’ll find it gets easier. The trick is to figure out a salary for yourself that you can transfer to your personal account on a regular basis, and leave the rest alone.
Keep receipts for all of the business expenses you have as well, which can be matched up to your spending habits at the end of the years. There will be a lot to keep track of, but it will be worth it if anything happens.