3 Keys to Financial Success as an Entrepreneur – Part Two

3 Keys to Financial Success as an Entrepreneur – Part Two

COURTESY: Yolanda Ransom – SEPTEMBER, 2019

You’re a creative and determined entrepreneur, fired up with innovative ideas and plans for your business. (In fact, your passion is one of the biggest reasons your clients want to work with you in the first place, and it’s what we definitely need more of in this world!) So in your excitement to get started, or grow, your business you may want to launch it immediately without considering how to set it up.

However, it’s critical that you set up your business carefully and correctly. To position yourself for both short and long-term success (because you’re all about creating wealth and a legacy for your loved ones, right?) you’ll want to establish your business as a separate entity apart from you as an individual.

In the second part of this 3-part series, I’ll explain why you need to set up separate accounts for your business, rather than just using your personal accounts. I’ll also tell you which separate business accounts you need to set up—and why—for maximum long-term business success. Because many entrepreneurs skip over the following steps in their excitement and haste to get started, their businesses are halted in their growth, or end up failing.

Read on to learn which accounts to set up for your business separately from your own personal accounts, for financial success as an entrepreneur:

 

  • Business Name & Identity

When creating your business, you’ll want to set it up as its own identity. Setting up a separate identity for your business is called business formation. By setting up your business as a legal entity, this will allow you to keep your business profits, losses, and/or assets separate from those you personally own. This will be crucial when it comes to filing taxes, or if/when any legal issues arise (like someone wanting to file a lawsuit against your business).

Even if your business happens to be “you,” (for example, my company is a service-based one named after me) you will still want to establish your business as a unique identity apart form you as an individual. Doing so will enable you to take advantage of certain legal and tax business benefits that you cannot if you’re operating your business under yourself as an individual.

To learn about the different options for setting up your business as a separate identity, you’ll want to reach out to reputable organizations (like GNEC), local small business offices, your state tax department, business lawyers, or similar professionals. They will help you figure out the best way for you to set up your business identity based on your needs and goals as an entrepreneur.

 

  • Business Tax ID

Depending on how you form or set up your business identity, in most cases you’ll need to set up a separate tax ID for your business. This is called an EIN (Employer Identification Number), and it is a unique tax number for your business. An EIN for your business works in the same way your Social Security number does for you as an individual—it identifies your company as a unique taxpayer.

If you do need an EIN, you will request it directly from the IRS after you’ve formed your business with your state’s tax office. An EIN allows you to transact business specifically under your business, rather than having that activity occur under your own social security number. So any business expenses, profits, losses, loans, etc., will be managed under your business EIN number rather than under you individually. This is critical at tax time, because it will impact how you file taxes, as well as your refund or tax bill. Depending on your business formation structure, you will be able to take advantages of the many tax breaks reserved only for registered businesses. Having an EIN can potentially protect you from owing a lot of money which could result from your business profits, and can also allow you to possibly benefit (for example, with a bigger tax refund) from any losses your business may have experienced that year.

 

  • Business Checking Account

Once you’ve formed your business, and received your EIN, you will want to set up a checking account specifically for your business. So any money you make, or bills you pay on behalf of your business will always be done through your business checking account—NEVER through your personal checking account. Why? Because mixing business and personal funds is the fastest way to become confused and create messy records. One of the things that is absolutely essential to your financial success as an entrepreneur is to have organized business records. This will allow you to quickly and easily see how your business is doing, and will make filing your taxes a breeze.

Opening a checking account for your business will also make your business look much more credible and established to potential clients, lenders, and/or business partners. It shows that you are serious about how you run your business and understand the value of managing your business’ money in its own account.

 

  • Business Credit Card/Credit Line

Similar to many of the reasons why you need to set up a separate business checking account, you’ll also want to apply for separate credit cards or lines of credit for your business (if you decide to use either). When it’s time to pay a bill for your business, using a business credit card establishes your business’ financial credibility (as opposed to using a personal credit card) and also provides a trackable receipt for a potentially tax-deductible expense.

 

  • Thoughtful Business Website

Having a business presence through a separate website for your company sends a message that you are a serious business owner. It also provides you with worldwide access to individuals and opportunities. The first thing most potential clients or business partners do when they learn about your company is search for you online. Setting up your own thoughtful business website creates a site that you own, where you control your business’ brand and presence separate from you as an individual. This is how others can always find you and do business with you. One of the worst things that could happen for your business is to have a ready customer search online for your business and find only your personal site, a poorly done website, or worse yet—no business website at all. This is the quickest way to lose trust as an entrepreneur AND a sale!

Many entrepreneurs rely only on a Facebook page to promote their company. I want to point out here that while Facebook is a powerful and useful tool for gaining clients and growing your business, it should not replace a business website. Why? Because Facebook ultimately manages and controls the content on its site. So if it has outages, or changes its policies one day, you may be unable to access your Facebook page/profile/group—and so will your clients or potential clients.

Please also note that the key point here is to create a thoughtful business website. It does not have to be super fancy, or costly. You just want to put some thought into your message and website, so that your company is well represented to those interested in doing business with you. Sites like Wix make it possible to create free well-done websites, and there are also many other website creation options which range in cost, depending on what you want.

 

The Value of Setting up Separate Business Accounts

Taking the time to set up separate accounts for your business in these five ways will create a solid and successful foundation for your business to build upon for years to come. As an entrepreneur, you need to ensure that your personal finances and assets are protected, as well as your business finances and assets. 99% of the time, this means that you will need to create separate business accounts solely for business use.

By clearly and legally establishing your business as separate identity from you, you will be able to enjoy the financial rewards of a properly managed business.  And as an entrepreneur, you can enjoy peace of mind from knowing that both your business and personal finances are well organized and helping to increase, rather than deplete your wealth.

In the final part of this 3-part series, you’ll learn about what types of help to seek for your business, as well as what to look for when selecting help.

 

 

About Yolanda Ransom

Yolanda Ransom provides personal finance education and training. The CEO & Founder of Yolanda Ransom Consulting, she is a speaker, trainer, writer, and consultant. A certified financial coach with over 20 years’ experience in the financial services industry, she has advised thousands of clients at companies such as NYC’s Office of Financial Empowerment, H&R Block, Xerox, and Chase Mellon Shareholder Services, and has performed over 100 one-on-one financial coaching sessions. Her motto is “If you don’t take control of your own financial future, no one else will do it for you. And you CAN.” She helps professional Black women take control of their finances and has empowered countless individuals to master their money and build wealth. You can find out more about Yolanda and her work at yolandaransom.com

Please share and like at:

Related posts

Give a Reply