Starting a business is an exciting journey filled with opportunities and challenges. From securing financing to employing the right team, entrepreneurs are on a non-stop growth path. One essential yet often overlooked aspect is the separation of personal and business finances. Let's delve into why this separation is vital and how to proceed.
A Startling Fact
According to a 2018 survey by Nav, an astonishing "50% of business owners without a business bank account want to open one but haven't had the time to set one up." This delay is risky, as separating personal and business finances is not merely a choice but a necessity to shield from potential future risks.
The Risks of Mixing Business and Personal Finances
The unique financial and legal demands on entrepreneurs necessitate proper management of funds. Combining personal and business bank accounts can expose them to significant financial and legal risks. For example, using personal accounts for business can lead to the IRS disapproving certain deductions, even if they're legitimate business expenses. Additionally, having a separate business account with the proper company designation can increase legal protections.
In the current economic climate, loans may be vital for business survival. The 2018 Nav study found that "70% of small business owners without a business checking account were turned down for a business loan in the past two years." Separate business accounts significantly enhance loan prospects.
Guidance from Financial Professionals
At IM Wealth Partners, we believe in the importance of professional financial advice. By consulting with financial, tax, and legal experts tailored to your industry, you can build a solid financial foundation that complies with all regulations.
These professionals can evaluate your unique situation and guide you, uncovering aspects that can transform your financial outlook. They can help with strategies for managing cash flow, planning growth, and more.
Managing Finances in One Place: A Feasible Solution
Separating personal and business finances doesn't necessarily require different banks. It's entirely possible to manage both within a single financial institution.
There are advantages to this approach. Multiple accounts at the same bank allow entrepreneurs to manage them through online or mobile banking easily. This convenience enables a seamless, intuitive funds management process.
That said, using more than one bank is a good idea. Platforms offer a unified experience for tracking personal and business finances across multiple banks.
Conclusion: Set Yourself Up for Success
Whether choosing one bank or several, entrepreneurs need to separate personal and business finances. Through careful research and collaboration with financial experts like IM Wealth Partners, entrepreneurs can focus on what they do best: growing their businesses.
The path to financial success doesn't have to be complicated. Let IM Wealth Partners help you navigate these critical decisions and position your business for success. Contact us today to learn more about our customized financial solutions tailored to your unique entrepreneurial needs.