Image by Steve Buissinne from Pixabay

By Anita Ginsburg

Starting your own business can be a dream come true, especially if you have long wanted to become an entrepreneur. However, as an individual proprietor or even as a freelance subcontractor, there are some important things to keep in mind regarding your venture’s finances.

Separate your personal from business bank accounts

Even if your business starts out small, it is always best to keep your personal finances separate from your business accounts. Mixing the two could complicate your company records and possibly result in your assuming business debts or obligations that should instead be managed from your business checking accounts and saving accounts. It may be unethical to blend the two types of financial interactions and could lead to questions or problems in the future. Some of the especially complicated and expensive issues might not show up until it comes time to figure out your taxes.

Set up a business budget

To keep your company expenses and income clear and distinct from other financial sources, establish a business budget that clearly delineates all operating expenses and sources of income. You should have a monthly budget, preferably with a reconciliation, and an annual comprehensive financial report as well.

Even if it is only for you, clear and accurate financial data is a must for any operating business. As your company grows, you might consider working with an accountant on a part-time basis to check your budget and oversee your accounts.

Poor business planning is one of the most common reasons small businesses fail. Setting up a realistic and accurate budget forces you to look at where your money is going and where your money is going. You’ll also be able to look ahead and anticipate any potential problems before they can hurt your business.

Distinguish between individual and company tax returns

You may decide to file an individual tax return that is separate from your business tax filings, especially if the financials are complex. Alternatively, depending on how your company is set up, you might be able to file a Schedule C on your individual tax return.

Avoid combining income and expenses from your personal accounts and the business accounts in a general way. Consult a tax accountant for advice on the best way to file tax returns for your company to maximize deductions, particularly if you have set up a home office. They’ll be able to give you the best information for your business’s specific situation.

Carry professional insurance

Every business owner should take out a professional insurance policy to cover losses due to damaged or defective products, scheduling snags, client injuries on the business premises, and facility damage due to weather or other causes. If you work from home, you might be able to use a homeowner’s policy rider for your business coverage. Ask the insurance agent about the best way to protect your company for various kinds of losses.

Becoming an entrepreneur is one of the most exciting things you will ever do as well as one of the most challenging. Manage your business finances separately from your personal expenses for ethical and accurate operations.

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Anita Ginsburg is a freelance writer from Denver, CO. She studied at Colorado State University and now enjoys writing about health, business, and family. A mother of two wonderful children, she loves traveling with her family whenever she isn’t writing. You can find her on Twitter @anitaginsburg.