03 Jun Business Owner : Mixing business and personal? – expenses save you money on tax deductions.
Hi, it’s your Money Mavens, and it’s no secret we love helping run Hendershott Wealth Management!
When Hilary launched our firm in 2014, she had a vision, determination, and serious passion.
She got to fulfill all of that – and of course, we get to be a part of it now – but what none of us could predict is how much we get to design our everyday schedule with freedom.
But if you’re anything like us, you may still not know who you need to be sometimes…
At any given moment, do you need to be ‘Business Owner’ or ‘Mom’ or ‘Best Friend’ or ‘On Date Night Not Worrying About My Phone’?
The problem is there are details about our business – and about your business too – that we can’t afford to confuse.
A big one? Financials.
We see this so many times with entrepreneurs. You start a business, maybe as a side-hustle or part-time while still having a foot in the corporate world.
Success grows, you step out of the 9-to-5 into the 9-to-9 (hello, newly minted workaholic!), and now there are a lot more details you have to keep in mind.
Payroll, distributions, unemployment insurance, benefits, cash flow, and 37 other particulars…
Without a good plan for keeping your financials straight, it can get out of hand fast.
Without clarity, business finances can catch Uncle Sam’s attention for all the wrong reasons, but this is where an ounce of prevention can serve you so well.
A good rule of thumb: Be impeccable about keeping separate accounts for your personal money and your business money.
It doesn’t matter if your business is a sole proprietorship and not technically a C-Corp, S-Corp, or LLC.
Your business needs its own bank account, along with at least a debit card, if not a rewards credit card attached to it.
Use one of those cards for all purchases that are business expenses.
Business expenses include software, hardware, office rent, contractors, employees, even some travel, auto expenses and meals.
Consult with your trusted tax preparer (this can be either an Enrolled Agent or a Certified Public Accountant) for a nitty gritty list of the types of expenses you should be assigning to your business.
Remember: all business expenses represent business costs, which get subtracted from your business revenues before you calculate the income tax you owe.
(Translation: business expenses save you money on taxes..)
As a business owner, much of what you spend to live your normal life is actually a tax deduction now!
Further, keep clean, accurate books for your business. Just because you can run your own QuickBooks doesn’t mean you should run your own QuickBooks.
Find a professional bookkeeper who can organize your financial activity, even if you’re just starting out, and can quickly explain the purpose of each transaction.
Keeping personal and business close can sometimes create great freedom and opportunities.
With your business finances, it’s best to keep the lines clear so you can have true peace of mind moving forward.
To your prosperity,
Your HWM Money Mavens
P.S. – If you have had bad experiences mixing your business and personal finances in the past, you’re not the only one. This is a key detail we talk about in our The Money Blueprint℠ Program. See what it’s all about here.