If you are being careful and precise, your new business will be completely insulated from your personal finances. This is the way entrepreneurship is supposed to work. Entrepreneurs put a lot on the line when they risk opening up a new business. They shouldn’t have to risk the standing of their own personal finances, too. That’s why legal creations like Limited Liability Companies exist – to put a barrier between a business and an entrepreneur’s private assets.
This should all be obvious to people who own businesses, or who are interested in doing so. However, these standard practices are not always put into effect in the real world. This is often because some businesses start slowly and gradually. Many entrepreneurs start out as hobbyists, only realizing that the product they create or the service they provide could be enough to produce all of the income they need to live.
This kind of entrepreneur tends to start out with business and personal finances all intertwined. The United States Tax Code actually makes it really easy to do this, not requiring that business finances be kept totally separate from private assets when the sums being considered are not terribly large. This may seem very convenient at first, but it tends to set young entrepreneurs up for some problems, not the least of which is bad credit.
When entrepreneurs finance their new businesses with their own personal money, they put themselves at great risk. It’s hard enough to have good credit as an individual, supporting a lifestyle and dependents. It’s harder to do that and have to support the daily operations of a business besides. It is much better for these finances to be separate – for personal and business credit to be set up on two different and distinct tracks. But this isn’t always how things work out in the real world.
If your personal and business finances are currently intertwined, you need to separate them as soon as possible. If you have damage to your personal credit as a result of business troubles, you can’t make it magically disappear once you’ve separated your finances. But there are improvements you can make to an ailing credit history. It all starts with looking at your credit report to see what’s wrong.
When you look at a credit report, you’ll see the occasional (or sometimes not so occasional) negative item. These items are reports about times that you didn’t pay a bill, requested a lot of money from lenders in a short period of time, or otherwise overextended yourself with regard to credit. To remove judgement on credit report, you have a few options. You could pay off the money (not always affordable); you could dispute the negative item and hope you don’t earn yourself legal attacks from the creditor; or you could hire professionals who tackle credit repair everyday. This last may be your best option if your personal credit has been damaged by the ups and downs of business. You will be able to correct these problems, and make sure they never happen again by partitioning your personal and business finances.