Mixing one’s funds with the proceeds of a business is a tempting prospect. For many solopreneurs, commingling allows them to have a much simpler time when banking. However, situations may arise where mixing business funds with personal funds can lead to a complicated mess. While the actual business of banking is easier, things like account-keeping, tax reporting and separating business expenses from private earnings become a nightmare.
by Expert Panel, Forbes Finance Council
Successful accounting, financial planning & wealth management executives from Forbes Finance Council share trends and tips.
The pertinent question is whether the time saved through simplified banking is worth the complexity of finance operations in the long run. Most financial experts don’t seem to think so. We asked 13 members of Forbes Finance Council to explain why that is and to present some of the best advantages of keeping personal and business finances separate.
Members explain why you should always keep your business and personal finances separated. PHOTOS COURTESY OF THE INDIVIDUAL MEMBERS.
1. Cleaner Tax Audit
IRS audit preparedness sways most of my Schedule C clients to separate personal and business banking. Many correspondence audits focus on one area of the return. If your Schedule C is chosen for an audit, you will have to submit bank statements to the IRS. Do you really want to submit your personal financial information if you do not have to? Separate finances make for a cleaner tax audit. – David Singleton, Seiler, Singleton & Associates, PA
2. Better VC And IPO Financing Prospects
Personal and business accounts need to be managed completely separately and everything needs to be done by the book, especially for startups looking to raise VC or exit via IPO or acquisition. You can have both accounts with one bank — as long as that works best for your business. It can help reduce management time marginally, but when starting a business, the business always comes first. – Carlo Cisco, SELECT
3. Building Business Credit
Although it may feel easier to mix personal and business finances to start, it will create …