4 Ways To Protect Your Personal Finances When You Start A Business

Protect Your Personal Finances When You Start A Business:

Looking after your personal finances can be tough when you start running a business because all of your attention goes toward the company finances. Obviously, it’s important to keep on top of your business finances but you shouldn’t let your personal finances slip because you could end up in trouble if you aren’t careful. Owning a business, especially a successful one, also means that there is a lot more at stake and bad decisions with your personal finances could have a knock on effect on your business. If you don’t know how to manage your business properly while also protecting your personal finances, here are a few important things you should know.

1.  Create A Separate Business Entity

The first thing that you should do is create a separate business entity to protect your personal finances. If you register your business a limited liability corporation (LLC), you keep it entirely removed from your personal finances. That means that if the company is forced to close and you have debts to pay, they cannot be collected against personal assets like your car or your house. But if you don’t do this and the business hits hard times, it could ruin your personal finances and leave you with nothing.

2.  Find Separate Funding Sources

When it comes to funding the business, it’s always a good idea to put some of the money up yourself because it shows investors that you’re serious about the business. However, it’s a big mistake to fund the entire business using personal loans or take out credit cards to cover your costs. If the business does not take off, you will be left with a lot of personal debt that you cannot pay. That’s why it’s important that you find outside investors as well as putting your own money in.

3.  Write A Will

If the business is a success, it’s important that you make arrangements in the event that something bad happens to you. Nobody likes to think about this, but it’s important that you and your partner look into wills and make some big decisions about what happens to the company if something bad happens to you. Without a will in place, you have no control over the fate of the company and it can cause a lot of tension amongst your family members after you are gone.

4.  Save For Retirement

A lot of business owners neglect their own retirement savings because they want to put all of their money back into the company, especially in the early days. But even though it’s important to invest in your business if you want it to grow, you need to think long term and make sure that you are looked after as well. Business owners are often counting on the success of the business and they assume that they don’t need to worry about retirement savings because they’ll be making big money in the future. However, you never know when the business could collapse and if you have no retirement savings, you’ll be in a very difficult position.

You need to take these steps from the very to protect your personal finances when you start a business so if the business does fail, you won’t go down with it. 

How did you protect your personal finances  when starting a business?  Comment below!

Best,

[a contributed post]