I’ve written several blogs before about mistakes entrepreneurs make in business. This time, though, I’m coming at it from the perspective of handling funds / investments / bank accounts and money, in general.
The Top 2 Biggest Mistakes Entrepreneurs Make When Starting A Business
1. Co-mingling funds (even after setting up a separate entity)
Let’s say you’ve filed your LLC or your Incorporated or your S corp or sole proprietorship. Great, you’re on the right track! However, if you don’t open up a separate business bank account (and just start depositing biz funds into your personal bank account), you can become personally liable.
Personal anecdote: I know this gal who is an interior designer. You might think,
“Oh, what kind of liability would she have?”
Well, there was this freak accident where a fire broke out in a tiny little office space that she had designed. One of the elements that she had picked out for this space had something to do with the fire and she, personally, got pulled into a debacle of settlements and such.
Luckily — and skillfully — she made no mistakes. She had a separate legal entity and had not co-mingled her funds. So, this practice provided her with a strong level of personal protection.
You want to be able to sleep well at night, right?
Therefore, you need to make sure you have a separate bank account for all your business needs.
Your CPA — which is a must — is going to make sure you’re doing this, too.
And, by the way, the mistake of co-mingling funds includes mixing things up on your expenditure.
This means you want to have a separate credit card. If you’re not doing things with a debit card for that account — which, by the way, I’m not a real fan of debit cards (another blog, another time) — then you should have a credit card that pays you back in rewards.
And that credit card should just only be used for business-related expenses.
This alone will make it so much easier for your bookkeeper to run that report at the end of the year and know exactly what expenditures were related to your business.
Now, for the 2nd biggest mistake that entrepreneurs make with funds, plus:
- How to find a good CPA
- Why / how becoming a legal entity provides you with extra protection
- Why quarterly payments (for taxes) are the way to go
Then, check out the Build Your Tribe episode below:
And don’t forget to subscribe to BYT for weekly episodes dedicated to getting your whole business life right — from social media to brick and mortars!
