For those who are new to the world of business, it can be a challenge to figure out how to keep your company‘s finances distinct from your own. To make it easier, we‘ve outlined a few steps that can help you get started. Whether you‘re running a small business or a large corporation, these steps will help ensure that your business and personal finances remain separate.

Step 1. Obtain an Employer Identification Number

The first step in keeping your business and personal finances separate is to get an employer identification number (EIN). This ninedigit number is assigned to your company by the IRS, and it is used when filing your businesss income tax return or payroll tax return, determining the type of business entity, opening a business bank account, applying for a business credit card, and more.

An EIN works like the business version of a social security number. Once you have an EIN, you wont need to use your social security number for any businessrelated activities, which helps establish a clear divide between your personal and professional finances.

Step 2. Establish Your Business Entity Type

Once you have obtained your EIN, you can move forward with creating a business entity type. This could be a limited liability company (LLC) or corporation. Doing so will officially recognize your business as its own legal being, and will allow you to file taxes separately from your personal returns. Additionally, it provides an extra layer of protection for your business.

Step 3. Open a Business Bank Account

Opening a business bank account is essential for keeping your personal and business finances separate. You should start by creating a business checking account, as it serves as the foundation of any company’s financial structure. This will help you to distinguish between your personal and professional finances.

Step 4. Get a Business Credit Card

Getting a business credit card is an important step for any entrepreneur. It allows you to keep your business expenses separate from your personal ones and helps you build your business credit score. This score is similar to a personal credit score but is specific to your commercial operation. Having a good business credit score can be beneficial if you are looking to expand your business, get a higher line of credit, or secure financing.

Step 5. Pay Yourself a Salary

Establishing a set amount of money to draw from your business bank account on a regular basis helps to create a clear distinction between your business and personal finances. Transferring funds from the business account to your personal checking account on a predetermined schedule, such as once or twice per month, is similar to receiving a salary from an employer. Doing this allows you to plan ahead and manage your finances more effectively, rather than just dipping into the business funds whenever you need money.

Step 6. Separate Receipts

Ensure that you are not intermixing your business receipts with your private ones. If you were to be audited, the IRS would need to examine your business receipts and if they are not distinct from your individual ones, it could cause problems. Remember that having a business bank account and credit card (only used for business reasons) will make the process of categorizing receipts much simpler.

Step 7. Identify When You’re Using Personal Items for Business Purposes

It is important to be aware of the times when you are using your own possessions for business activities. This could include having a workspace in your home, driving to customer meetings in your car, or speaking with clients on your personal phone. Knowing when you are using these items for business will enable you to deduct some or all of those costs when it is time to file taxes. Therefore, it is wise to educate yourself on which expenses qualify as business-related and which do not. Make sure to keep track of these transactions and provide them to your accountant when filing taxes.

Step 8. Educate Other Members of the Business

The final step in creating a distinction between business and personal finances is to ensure that all members of the company are aware of the process. It is important that everyone understands the difference between a business expense and a personal expense, and to develop an effective system to make it as simple as possible to keep them separate.

It is vital to keep personal and business finances distinct from one another. Keeping them separate helps to avoid confusion and ensures that all financial transactions are properly accounted for. Additionally, it can help to protect personal assets in the event of a business failure or lawsuit.

If you believe your business is ready to start, please get in touch with Filthy Rich Idea at 888-369-4332 to find out more info or fill out our online application today for a business loan. We got your back!