For anyone who owns their own business, always keep your business money and your personal money separate. There are many reasons for that, and just a few are:
- If your company gets sued, and you did not keep your money separate, is it seen as your money and someone can go after your money;
- If you don’t keep your books in order, then again it will be seen as all the debts, and assets, are really yours;
- Keep your business licenses current and pay the State filing fees, so that business itself doesn’t lapse, as again if it does, all the assets and debts can be treated as yours.
- If your business ends up having to file Bankruptcy, any of the above listed issues, and more, can mean that the business’s debt can become yours.
Some examples of what not to do when you own your own business (and these are actually examples I have seen in Bankruptcy Court).
- Paying to take your children to Kart Kountry on the business account;
- Instead of writing yourself a paycheck, you just pay your personal bills with the company’s account;
- Transfer property (cars or anything else) from the business to yourself within 24 months of filing Bankruptcy;
- Use the company credit card to pay for your personal expenses; and
- Have the company pay for your health insurance (unless the company pays for all of the employees’ insurance).
These are just 5 of the most regularly seen issues that have come up (other than the Kart Kountry one, as it could be anyplace like that). Unfortunately, bankruptcy can happen and a business bankruptcy can take down your personal finances too, if you don’t keep all of money separate.
As a bonus pointer, never co-sign for someone, as I have seen entire families get pulled into bankruptcies because the grandparents co-signed for their children and grandchildren.