It's Not Business - It's Personal

Online, February 15, 2011 (Newswire.com) - Many business owners make the same mistakes when they are just starting out. One of the biggest mistakes they make is not keeping their business and personal finances separate. It's usually a legal requirement for business owners to keep separate accounts for business and personal use, but there are those that blur the line - and this can lead to a world of trouble.

Some owners think that because they are sole proprietors, they don't have to keep separate accounts. But what happens when you find your personal cash flow is lacking? Often times, business owners going through a financial rough patch personally will dip into their business funds. This blurs the line as to what is okay to claim as a business expense on tax returns.

Smart business owners will work to be sure they handle their finances in a much more meticulous fashion, not only keeping the accounts separate on paper, but in use as well. If you must borrow money from your business (personal loans or small business loans) to make ends meet, be sure you don't show it on your taxes, and that you pay it back as soon as possible. You don't want to ruin good relationships with vendors who expect payment upon delivery ¬- just because you needed help to make your house payment.

Businessmen and women should learn to play by the rules if they don't want to run into trouble, particularly with the IRS. Owners should take the time to discuss best practices with a tax attorney and an accountant, to be sure there are no uncertainties.

Business owners have enough issues to worry about, particularly if they're just getting their businesses off the ground. No one wants the IRS breathing down his back, so make sure that you're careful not to muddy the waters of personal and business credit.

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