Introduction.
This topic is a very crucial one, especially for new business owners who are still inexperienced and yet to understand how to separate themselves from their business. This particular topic tends to affect so many other things, which may include; how to achieve work life balance, how to determine your remuneration as the owner of the business, how much tax you pay and how to manage your time.
Treating Your Business Separate From Yourself.
The following are the things that will help you treat your businesses as an entity.
1. Your business is a legal entity.
One of the the key aspects of separating a business from the owner is establishing the business as a legal entity by registering it with the government as either of; corporation, limited liability company (LLC), or partnership.
Once the business is registered under the law of the county, the business assumes full rights and responsibilities, also separating and shielding the owner and his assets from liabilities relating to the businesses.
2. Separate your finances.
It is of almost importance for the a business owner to separate his finances from that of his business.
You should maintain separate accounts and credit cards for yourself and your business.
This is important because, mixing your finances with that of your business tends to complicate bookkeeping and brews confusing between business assets and that of the owner.
3. Autonomy of decision-making.
Granted, the owner of the business has significant influence on the decisions of the business, however, it is important that these decisions are made based on long term goals of the company, rather than to satisfy the personal preferences of the owner.
4. Professional relationships.
Here, the owner's personal relationships and attitude should be different from that of his business.
This is to make sure that the business relationship between the company and her clients, investors, suppliers, partners etc are very professional.
5. Identity of the brand.
It's important to build a very solid brand identity for a business, this will help differentiate it from the owner.
Some of the things needed to perfect the branding are; business name, logo, mission, vision and core values. This should resonate with the target audience.
6. Continuous planning.
To run a business successfully requires long term plan and continuous planing. The plan should include the time the owner will no longer be part of the company because of ill health, death or what so ever reason.
A succession plan should be in place, this is to ensure that the business continues to do well and for smooth transition should anything happen to the founder of the business.
7. People should be responsible and accountable.
The the business should be professional, responsible and accountable for all her actions.
This therefore means; setting clear and achievable goals, closely supervising the process and holding the business responsibility for all actions and inactions.
Benefits of treating a business differently from the owner.
Helps protect your assets: When a business owner treats his business and self separately, his personal assets would be shielded from business related liabilities, reducing owner risks.
Helps the business grow: Treating the business differently helps the business grow and facilitate scalability.
Encourages professionalism: When the owner of a business sets clear boundaries between himself and the business, it shows professionalism which will eventually trickle down to the rank and files. This speaks volumes about the business as people will perceive it as credible.
Longevity: Since treating a business separately from the owner helps in long term planning, it therefore guarantees that the business would continue to do well after the founder is gone, because plans have been made for a smooth transition.
For tax purposes: Treating your business separate from your yourself means that all the money in the business account are business money. This makes it easy to arrive at the amount to pay as tax after all the receipts of expenditures are taken to the accountant.
Conclusion.
As a new business owner, its important to understand that you are not your business, the two of you are two separate people and should be treated as such.
I understand that a business owner may want to use his personal money to solve some business problems or vice versa. In this case, it should be considered a loan and properly documented.
Finally, you may think that you are the soul of your business, but it's not true. Some day, you will not even be in the life's of your own biological children, this is a hard truth we all should accept.
Therefore, as you train your children the best way possible to compete favourably with others out there, also establish your business on sound business principles, so that it will be unshaken when you are no more there.
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Nicely said. As a business owner myself, I can relate to pretty much all of it
it's not an easy task. However it's crucial for a business to run smoothly and successfully
.
There is really not much to add to your highly accurate and valuable information.
Even a sole proprietor should treat their business as a separate entity, regardless of whether this is required by law or not.