How to Separate

While there may be others, the risk most often thought about by business owners is financial. The fear of failure is not as scary as the fear of financial ruin as a result. That fear stops many from taking the leap and taking a chance on a new business venture. The solution is both simple, and complex: separate your personal credit from your business credit. Why Separation Is Important You can only do so much to insure the success of your business. Planning and preparation, as well as a sound business plan will go along way: however, IRS studies show that as many as 85% of all small businesses fail in the first five years. What's more, an analysis by Dunn & Bradstreet shows that the figures do not go down much in the following years and that up to 70% fail in the first eight years. Of course, no one goes into any business thinking it will fail. The plan is to succeed, but the figures show that even the best-laid plans can fail. Famous and very successful business people all through history have failed many times before succeeding, so it is nothing to be ashamed of as long as you try. The shame is in not preparing for any possibility and protecting yourself and your family. It is much harder to start over if you have to re-establish your personal security, too. Personal Preparation In order to accomplish this mission and successful separate your credit from that of your business you need to accurately assess your character. Going into a business takes a great many traits that are similar to those needed to protect your finances so you may have already determined your strengths and weaknesses in these areas. If not, you should, and this will help you in both determining what you need to improve or provide for your business as well as your finances. Be truthful, and ruthless in your appraisal of your abilities. The important thing is recognizing where you need work, or help. If you cannot strengthen the areas that are weak, you can seek help with them. If you cut yourself too much slack, you may end up not working on critical areas, or getting help and ending up losing more than you can afford to lose. deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow deadpeopleshow o Attitude: To start with, the right attitude will go a long way in helping you succeed in separating your personal finances from your business finances. How you look at the money will give you some perspective. The businesses money is not yours. You are simply an "employee" of your company and it pays you. Thinking like that will help you place the income from your business into an appropriate account separate from your own. Pay for all business expenses through that account, not your personal bank accounts, credit accounts, or loans. o Discipline: You must have a great deal of discipline to run a business to start with, but in order to keep your finances separate you need great strength. You will be handling all of the money as it flows through your company. There will often be great temptation to simply take what is there instead of putting it through its proper channels. If you know you lack the proper attitude, and can't make yourself understand the complexities of having separate personalities from your business, or have a record of difficulties handling your finances, get help. Hiring an accountant is expensive, but not nearly as expensive as losing everything when a business fails. Separate You From "It" You need two separate bank accounts for money; however, it just is not as simple as opening a new checking account at your local bank. First, you have to make your business a separate entity. This may seem strange, especially if your business is service, or skill oriented and you "are" the business. You still have to make it legally separate from your personal self. You can do this by applying for an EIN number. "EIN" stands for employer identification number. This takes the place of a social security number as an identifier for your business. Any transactions, loans, bank accounts, or income forms must be filled out, or applied for, using this number instead of your personal social security number. Getting an EIN sounds scary, but it is actually very simple. You can do it completely online, and you will get the new number immediately. Go to the IRS website for the form to fill out. Business Finances Once you have your separate entity created, apply for business finances. Open a checking account in your business' name. Get a credit card, and/or apply for a loan. Getting a loan in a business name is difficult when just starting up, but if you have some record of income and expenses for proof of viability, you can get a loan for operating expenses or business expansion. Building Credit At first, it will seem like starting from scratch. If you figured on using your personal good credit to obtain start up money it will be almost impossible to separate your finances from your business. However, there are resources to help build your business' credit worthiness. Dun & Bradstreet provides a great deal of information on the atmosphere of business finances as well as programs to help you build your business' credit. Another great way to set up individual business credit is to get accounts with the various vendors or companies with whom you routinely do business. Use those accounts to order supplies, or get services and pay the accounts in a timely manner. That strengthens your credit the same way paying on time strengthens your personal credit. After a short time, you can use that as proof of fiscal responsibility with any bank. Beware of scams that offer promises that sound too good to be true: or worse--illegal. They are what they sound like, scams, illegal or not. The only way to build your credit is with careful attention and hard work. Support When you are ready to take the plunge, get counseling. Most banks have business bankers that will be happy to give you advice on the direction that suits your needs best. They are especially helpful for anyone wanting the assurance of having someone guiding them. It is certainly possible to do it on your own, but most first time business owners have never been in a similar situation. Having support and experience to guide you is assuring.