OneMain Financial: Why You Should Separate Your Business and Personal Finances

There’s been a significant boost in small businesses that have emerged over the years, from web design and photography to baking. But juggling business and personal finances can be tricky for a business of any size if not done correctly. Maintaining separate accounts for a small business is crucial, and skipping this step can have significant ramifications down the line.

For anyone who has recently embarked on a small business venture, here are a few reasons why separating personal and professional finances is necessary.

Track business expenses

Separating business expenses from personal expenses can greatly impact how easily finances can be tracked, regardless of the size of the business. Keeping a clear distinction between these categories makes it easier to identify areas where money is coming and going, making it more straightforward to keep track of financial progress.

It also helps budget accurately, as money is only allocated to relevant spending areas. This may help to develop strategies for effective fiscal management and maintaining control over finances.

File taxes with ease

Separating personal and business expenses simplifies the process of keeping track of deductions and helps to reduce any liability related to a mistake on a tax return. This also makes it easier to identify which transactions are related to a profession or hobby, which allows for an accurate report of income for each category.

Small businesses may be entitled to benefits like tax write-offs, making running the business easier. Even though sole proprietorship businesses (a one-person business) are not technically required to maintain separate finances, keeping finances separate is essential to be eligible for tax write-offs.

Small business owners may benefit from write-offs for transportation, business travel, professional development, and even banking and insurance fees if they consistently maintain separate finances and receipts.

Establish business credit

Establishing business credit is important when starting a business. If a business owner is just starting, they’ll need to ensure that their personal credit is in good standing to become eligible for business credit. If not, practicing positive financial habits and opting for debt consolidation can lead to boosting their credit score.

Business credit extends to a company, as opposed to personal credit, which revolves around an individual. Access to business credit allows business owners to purchase equipment, supplies, travel, lodging, and more. It also helps distinguish personal expenses from business expenses each month.

Protect personal assets

All business owners should be aware of the importance of protecting their personal assets. This ensures that claims and lawsuits related to the business can’t touch other parts of an owner’s finances.

Protecting one’s personal assets is not just a legal issue; it’s also essential for maintaining financial stability during turbulent times. This can include investing in insurance for liability protection or setting up a trust as an extra layer to safeguard what matters most.

Maintain business credibility

A separate business account helps create a more professional image and improves the credibility of a small business. When the business name is listed on checks, invoices, and credit cards, it becomes more reputable than transactions made from a personal bank account.

Save time

Maintaining a separate account for business means that when it’s time to balance books or review profits, the process is effortless rather than tedious. Spending the extra time now to review bank statements and highlight business expenses can help free up more time in the future to do other productive tasks.

The bottom line

Financial housekeeping may not sound like the best reason to get a dedicated bank account for a small business, but it’s a core factor that helps entrepreneurs keep their finances in order. Separate accounts help reduce the risk of unintentionally using business funds, improve organization, maximize tax write-offs, and help boost lending credibility.

Sponsored Content

About OneMain Financial

View Website

OneMain Financial is the leader in offering nonprime customers responsible access to credit and is dedicated to improving the financial well-being of hardworking Americans.

Contact Information:
Name: Sonakshi Murze
Email: [email protected]
Job Title: Manager