Adam Povlitz is CEO/President, Anago Cleaning Systems, a leading franchise focused on technological advances in janitorial operations.
As CEO of a franchise company, I always encourage operators not to mix their finances. When you’re a sole proprietor looking to launch a new company, it’s important to establish clear silos between your personal and business finances—not only for maintaining accurate financial records but also for tax and legal reasons.
Additionally, you should know your options for how to fund your new business. Many entrepreneurs bet on themselves with personal money, but there are other ways to keep your money away from your new business. Drawing from my own experience, here are several strategies you can use to successfully operate and expand a business without risking your personal funds.
Creating A Roadmap To Success
Picture your financial landscape as a vibrant city with two distinct neighborhoods: one for your personal finances and one for your business finances. Each has its unique characteristics, landmarks and points of interest. Just as you wouldn’t erect a skyscraper next to a family home, you’ll want to keep your personal and business finances separate in your financial planning. So, how can business leaders go about doing this?
1. Establish dedicated checking and savings accounts for your business. These accounts are the financial hubs of your business district. They help you effectively manage and track your business income, expenses and investments. Plus, they create a clear separation between your firm’s finances and your own.
2. Set up distinct bookkeeping methods. These are the record-keepers, the scribes of your financial transactions, ensuring that every detail is meticulously documented. Such precision is especially important for tax time and can offer a clear view of your business’s financial well-being.
3. Create distinct financial plans. Your personal plan should focus on your long-term goals, such as retirement, education funding and major purchases. Your business financial plan should focus on achieving your company’s objectives, such as expansion, revenue growth and profitability.
4. Regularly review and adjust your personal and business financial plans. Just as a city evolves, so, too, must your financial plans. Stay attuned to changing circumstances, market trends and personal priorities. Adapting your plans accordingly can help ensure that your financial strategies align with your evolving goals and aspirations.
Funding Options: How To Fund Yourself
Look for ways to fund your startup to avoid further entanglement between your personal and new business finances. Small business loans and grants are two effective methods for getting capital. Banks and credit unions offer a variety of loans to small business owners, including term loans, lines of credit and equipment financing. You’ll need a strong credit history, a solid business plan and some form of collateral to qualify.
You can also investigate government or private organizations’ grants, often available to small businesses in specific industries or regions. Do research to see if there are any grants that your company might qualify for.
Seeking investments from friends, family or angel investors is another viable funding option. If you have a compelling business plan and can demonstrate a clear path to profitability, you may be able to attract investors who believe in your vision. Angel investors are experienced entrepreneurs or industry experts who provide capital, mentorship and guidance.
Crowdfunding is a relatively new way to raise capital that allows entrepreneurs to solicit small contributions from many people. Several crowdfunding platforms, including Kickstarter and GoFundMe, enable you to create a campaign and share your story with the world. While crowdfunding can be a great way to raise capital and generate awareness for your business, it does typically require careful planning and execution.
Tax Strategies: Maximizing Profits And Minimizing Liabilities
Understanding the ins and outs of tax laws is important for solo entrepreneurs looking to build a company. The business structure you choose—for example, an S corporation or a limited liability company (LLC)—can significantly impact your tax liability. I recommend consulting with a tax professional to determine the best structure for your business.
Maintaining meticulous records of your operation’s finances is important for accurate tax returns. This should include tracking all income sources (like sales, interest and rental income) and all business-related expenses (like rent, utilities and employee salaries). Good record-keeping can make tax time more manageable and help you find potential deductions and credits that can lower your tax bill.
Last but certainly not least, file your taxes on time to avoid penalties and interest charges. Know tax deadlines and, if needed, bring in a tax professional to ensure everything is shipshape. By weaving these tax strategies into your financial fabric, you should be on your way to maximizing profits, minimizing liabilities and facing your taxes with confidence and success.
Conclusion
In my experience, keeping personal and business finances separate can be foundational in establishing a sound financial structure for a company’s long-term success. By following these practices, you can simplify your accounting and tax processes and protect your personal assets from business liabilities while setting up your multi-unit expansion for success.
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