Financial Tips for Small Business Owners


  1. Keep corporate vs. personal debt separate.  It is a common practice for small business owners to experience periodic cash flow problems and turn to use of personal credit cards to infuse cash into their business.  It is important to note that debt incurred under a credit card held only in the business owner’s personal name is not a liability of the business, so if there is a default on the credit card, the business owner will get sued.  For this reason, use of corporate cards is preferred for business expenses. Additionally, it is a bad idea to allow your personal property, such as your personal residence, to be used as collateral for a business loan.  If the business defaults on the loan, you may lose your home.
  1. Use of personal retirement funds.  In addition to personal credit cards, I have seen business owners frequently deplete personal retirement funds to satisfy corporate obligations.  Retirement funds are exempt under bankruptcy law and most state laws, so these funds should not be used satisfy corporate obligations.
  1. Pay taxes when they are due.   Timely payment of withholding and other taxes is critical to maintaining a viable business.  Nonpayment of taxes can result in significant tax penalties and interest and tax levies.  Additionally, certain types of taxes like withholding and sales tax carry personal liability for the business owner.
  1. Keep good records.  It is important to keep good records for numerous reasons.  If an employment dispute develops, the labor department may investigate and request records dating years back, so maintenance of accurate payroll records is important.  The importance of an accurate accounting system is also important if there is ever a dispute with a creditor over the existence of a payment default or the balance due.


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