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The hardest thing for many business owners is separating what your are spending on your business from your personal finances. It seems like the easiest thing to do is to keep them together. But when it comes to start figuring out your taxes, this bundling together can become a nightmare of receipts and ambiguous receipts that you don’t remember what they are for. The whole process can be extremely frustrating.
Ideally, you should start the day your start spending money on the business. Part of your business plan should contain a plan on keeping your business finances separated. You want to invest in different colors of folders, create different files on the computer for separate receipts or expense reports, and set up a completely different budget on household expenses and business expenses.
It can get a little tricky when it comes to a home office. Because often your business expenses and home expenses are encapsulated in under some of the same bills such as the internet and phone bills. In this situation, you will need to create a clear definition of approximately how much of a percentage you use for business and how much is for the household. An account or tax preparer can help you in figuring it out.
You must resist the temptation to combine your business expenses with your personal ones. Both your household and business can suffer. Plus, you might miss some of the more important tax breaks that are available to you. Knowing what your finances is crucial to balancing both your business life and your personal life.
