One of the biggest concerns a small business owner may have when considering bankruptcy is the potential effects on their personal assets. Particularly as a small business owner, there may be an overlap between your personal and business finances. To take advantage of the legal protections that exist to keep your personal assets safe in the event of bankruptcy, follow these steps to keep your business finances and personal assets separate.
1. Create separate bank accounts for your business
Having separate checking and savings accounts for your business makes it clear what assets belong to the business. Especially if a business has been struggling, keeping records of business transactions in one location is essential.
2. Route all utilities and bills for your business through the business bank account
Any utilities or bills you pay for your business should be routed through the business’s accounts. This separates your personal liability from the business’s responsibility in the event of a failure to pay, even if you are the sole owner.
3) Establish Credit for Your Business
Having separate credit lines for your business keeps its responsibilities separate from your personal debts and assets.
Apply for a DUNS number
A Data Universal Numbering System (DUNS) number is a unique 9-digit number that identifies your business, similar to how a social security number identifies a person. Once you have a DUNS number, your business can begin to create its own unique credit identity separate from your personal credit.
Use your company information on credit applications
Switch all credit applications and interactions with suppliers, vendors and other services your business interacts with over to the business’s account.
Use a business credit card
Filter as many transactions as possible through a business credit card to connect your business expenses to a verifiable source. This will also further separate your business credit history from your own.
Keeping your business and personal finances separate is vital to caring for a small business. The sooner you establish separate business accounts for your company, the better, but there is always time to take these steps to help protect your personal assets. If you have questions about how your accounts have been used or what else you can do to protect yourself in the event of declaring bankruptcy, speak with an attorney experienced in helping businesses navigate this process.