Getting too close to your business when personal and business funding blend

Getting too close to your business when personal and business funding blend

Most small business owners are pretty close to their business.  For many, it is a major part of their life and the distinction between personal and business is easily blurred. This can also cross over to their financial affairs with business and personal finances being interrelated.

Some recent tax cases are a reminder of the risks you run if you don’t keep a sufficient separation between personal and business. Get it wrong and you can lose some valuable tax deductions. The main area of risk is for those that operate their business through another entity such as a company or trust. Maintaining this structural separation is quite common and often makes a lot of sense for asset protection purposes. But problems often occur when you personally incur an expense on behalf of your business and then seek to claim tax deductions for the expense.

The most common example of this is interest costs on borrowing.

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