When starting a small business, it's important to keep your business finances separate from your personal finances — particularly when it comes to expenses.
Tempting though it might be to use your personal credit card to buy a smartphone as you launch your business, that sets a dangerous precedent. If you don't treat your personal finances and your business finances separately, the law won't, either. This is known as "piercing the corporate veil." And it could mean, among other things, that you lose the liability protection that ought to come with incorporating.
Here are some tips on how to avoid that potentially disastrous scenario.
Don't Jump the Gun
Starting a small business can be stressful and time-consuming. It's easy to fall into "just-for-now" rationalizing. You'll purchase equipment and other startup essentials from your personal checking account. And then once you get up and running, you'll file all the proper paperwork to become a corporation and open a bank account dedicated to the business. No problem, right?