Thursday, June 5, 2014

Small Business Owners Tip - Personal Matters and Business don't mix

Congrats on your new journey as a business owner. The best times are ahead, challenges are also ahead. Start off on the right track by establishing a separate entity for your new venture. A LLC (limited liability company)  is  one option that creates a separate identity for your business.  Setting up a LLC can  protect your personal assets  from seizure  in the case your business is sued.

Establishing a LLC is  one step.  It's still your responsibility  to keep your personal income separate from your business entity and to keep up the tax filings and legal requirements of operating a LLC. One requirement of  a LLC iowner is maintaining a business bank account. The Business bank account should only be used for  Business income and expenditures.

To withdraw money from the business to pay yourself, you can take an owner's draw.

Commingling  business income and personal income will forfeit the protection the LLC provides for If you choose not to incorporate your business, it is still a great practice to differentiate your business income from personal income. The advantages include businesses' profit/losses are easier to compute,   less likelihood of an IRS audit,  and loans approval odds increase.

I recommend all new business owners and those thinking of going in business for themselves to seek help from cpa, lawyer ,and/or professional tax advisor. This will save you a lot of headaches in the end.

Being a successful business owner takes more than talent and creativity, it takes resources and tapping into a network of  professionals.

*TaxCharm blog is not legal advice.  It is meant for informational purposes only.*

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