Running a business is the dream that many people have, and it’s definitely a good dream. So when you finally get a chance to make it a reality, you’ll probably want to take steps to protect it as much as you can. After all, why would you want to make any type of mistake that’s going to keep you from enjoying the type of life that you’ve always wanted? Thankfully you do have a lot more options than you might realize to protect your business.
It all starts with making sure that your business life is separate from your personal life. Again, this might seem obvious, but we’re always surprised to see people that aren’t incorporated. Incorporation is something that’s pretty straight forward, and it tends to make your life a lot easier than if you were just trying to group everything together. If you aren’t incorporated and you don’t have all of your business life separated out from your personal life, you’re going to end up risking a lot more liability than you should.
This is because when your business life and your personal life have no separation, you’re basically opening up your personal items to seizure if you lose your case! That’s something that no one wants to go through.
The more separation you can build in, the more obvious to the IRS that you’re running a business. This means that the IRS is a lot less likely to throw out all of those expenses that you’ve claimed, or other things that are designed to lower your bill. If they feel that all you’re doing is a hobby, then you’re not going to be able to do much of anything when it’s time for tax season — you’ll lose every time.
Save yourself the trouble — separate things out. Here’s what we suggest:
Incorporation would be the first thing that we suggest. It makes getting bank accounts and even business credit so much easier. If you lump everything together, then you’re going to have the problems that we already listed. However, if you incorporate properly, you’re going to be able to shield your personal assets in case you have to declare bankruptcy with your business or even if you have to deal with litigation.
Make sure that anyone can go back and see what your personal money is and what the corporate money is. If you are incorporating, that means that you will want to have an obvious salary being paid out to you. Once you grow, you can invest in payroll software that computerizes the whole process. This way if you’re audited you have to only go through a few screens and print out exactly what money went where.
Staying organized is just one more facet of running a business — are you ready for you? Start separating your business life from your personal life for the best results around!