Best Personal Financial Practices to Protect Your Business
It took you a long time and lots of hard work and investment just to build your business. You have read every book written for entrepreneurs and even try to keep yourself updated with the latest industry news. But what many entrepreneurs fail to realize is that their personal finances can be the very reason for their brand’s downfall.
Every decision you make can influence your brand. The last thing you want is for your business to crumble just because you failed to make the right decisions in your personal life. To better mitigate financial risks associated with your personal finance, here are three things you ought to keep in mind.
Marry the Right Person
The right person will help you build a thriving business. Depending on the circumstances, your spouse may be entitled to up to 50% of your brand. This is especially true if your spouse is employed in your business or if the business was built during the marriage.
Even if you truly love your spouse, things can go wrong down the road and you can end up wanting a divorce. If this happens, you can hire an attorney specializing in divorce cases. They can help you find ways so you can get as much as you are entitled to, especially when it comes to your business.
But then, one of the best ways to prevent a divorce from ruining your business is to take preventive measures asap. You can talk to your wife about signing a prenuptial agreement stating your business as your separate property. An early postnuptial agreement can also be a good idea, although judges often view such agreement skeptically.
If you were not able to fulfill a prenuptial or postnuptial agreement, you can consider the following to safeguard your brand against the impending divorce.
- Fire your spouse asap. The more active your spouse is in your business, the stronger her case will be for helping build the company. They can use this to ask more from your businesses since they helped you build the brand.
- Don’t deprive your family’s cash flow. Your soon-to-be ex-spouse can make a case that he or she is entitled more of the company since you built the business by putting your personal finances at stake.
- If your main priority is your business, consider sacrificing your other assets. This can include your home, vehicle, or retirement accounts in exchange for the business.
Avoid Using Your Personal Wealth in Funding Your Business
Many startup business owners would try to mix their personal finances with their business in hopes of saving the company. It will be very difficult for you to separate your business and personal finances once these two get mixed up. You could lose your savings, your home, and your family for sacrificing your personal money for the brand.
Many entrepreneurs are forced to use their savings to finance their businesses. They believe that this will give them better peace of mind knowing they won’t have to deal with a bank or lender when trying to pay off a loan. Self-financing also saves you time and effort instead of going through the loan application process.
When you finance your brand with your own personal savings, you can enjoy better control of the brand. There is no need to rely on other people like the bank, lender, or even investors. You get to retain full ownership which means all future profits are yours alone.
But then, self-financing can definitely put a strain on your personal finances. You can end up using your family’s emergency funds just to buy new business equipment. If you use your home as collateral for a business loan, failure to pay up your lender can lead to a foreclosure.
Keep personal and business assets separate. As much as possible, don’t use your personal wealth to fund your business and vice versa. Think twice before using your own savings and asset and consider other financing options first.
Never Mix Up Personal and Business Financial Transactions
Did you use your personal credit card to pay for certain services for your business or vice versa? Then now is the best time to hire a bookkeeper. There is no easy way to get out of messy accounts than to find a reliable bookkeeper to help you out.
You will still need to help your bookkeeper keep track of your expenses. This can include matching dates with your receipts and tag those purchases meant for personal or business purposes. Know that categorizing your existing expenses is your first step in detangling your mixed up finances.
Start getting your business a separate bank account. This will help you build your business credit score and increase your chances of getting a business loan approval in the future. This will also help build your brand’s credibility.
This goes to show that when running a business, you will need to separate your personal life from your brand. Failure to do so can lead to dire consequences. This is why there is a need for you to think twice before you make any personal decision. You want your business to thrive the best way possible. Don’t let your personal mistakes stop your brand from being successful by keeping these tips in mind.