One of the primary benefits of having an LLC is that it protects you from personal responsibility if your company is sued.
However, combining your professional and personal funds puts you at danger of losing this important safeguard. This tutorial will walk you through the basic measures you may take to segregate your company and personal funds and prevent personal responsibility.
STEP 1: ESTABLISH BUSINESS BANKING
Setting up a separate company bank account and credit card is the first step in separating work and personal funds. As a result, the company may conduct transactions independently of its owners. It is important to note that many banks need you to obtain an EIN before opening an account.
Your business accounts should only be used for business purposes. Using your business accounts for personal expenses might expose you to personal accountability for your company’s obligations. Mistakes can occur; we suggest keeping a tight check on your accounts to guarantee proper separation.
STEP 2: CREATE A BUSINESS ACCOUNT
An excellent company accounting system assists you in documenting that your business and personal money are appropriately divided. Furthermore, an accounting system will assist you in creating financial reports, tracking your company’s success, and simplifying tax filings.
STEP 3 DOCUMENT BUSINESS DECISIONS
Documentation of crucial business choices…
Ensure that all business transactions are signed in the company’s name. To minimize personal responsibility, all individual signers should state their function within the firm and that they are signing on its behalf. Find out more about signature etiquette.
Meetings should be documented with professional minutes, and decisions should be documented with signed resolutions. These documents serve to demonstrate the corporation as a self-contained entity with decision-making authority.