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Separate business and personal assets

If you have a company, partnership or trust structure it is vital to understand what is a business asset and what is not. We find that the clients who get their affairs into a mess inevitably mix business and private expenditure in the business records.Firstly, ensure that you have a business bank account into which you deposit income and from which you will pay expenses. If you pay all of your expenses from this account your record keeping will be a lot easier. If you need a credit card for business expenses, get one that is just used for business and have a separate personal account. It is tempting to park excess business cash in your personal high interest or mortgage offset account, but it is better to open a high interest account in the name of the business.By keeping good separation of business matters, your records will be tidier and the amount of work required to be done at year end will be reduced.If your entity is not paying you a fixed salary, you will need to take drawings from your business bank account. This should be done in a controlled manner with a predetermined limit. If you are drawing funds from a company, remember that the company is loaning you money and you will need to repay it. The ATO does not like overdrawn loan accounts and has specific legislation to penalise shareholders if they have drawn excessively from a company.The other benefit of keeping a clear distinction between your assets and the business assets is the concept of limited liability. When a company incurs a debt, the debt belongs to the company, not to the shareholder. In the unfortunate circumstance where the company becomes insolvent, there is generally no recourse to the shareholder's assets to pay for the company's debts.Business Guide – Top 10 tips for a new business

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