For Oklahoma entrepreneurs, setting your business up as a separate entity means legally and financially separating your business from your personal holdings. Separations include business transactions such as purchasing inventory, salary expenses, banking transactions, and other business-related activities. A separate bank account for business transactions is essential to keeping personal and business items separate.
Business transactions must function apart to shield personal assets from liabilities. A business license and registry separate your personal and financial affairs, and an accounting ledger keeps records of business transactions for legal or tax purposes.
Business entity transactions
An accounting ledger records business transactions like business loans and repayment. If a business owner loans money to the business, it’s considered an outside lending source. Renting office space or operating online and paying internet fees are business transactions. Here’s a brief list of other business transactions:
1. Utilities and Renter’s Insurance
2. Cash and Credit Transactions
3. Interest Paid
4. Fixed Asset Transactions
5. Revenue Generating Transactions
Most transactions are directly related to the daily functions of the business. Internal transactions like asset depreciation or investments occur infrequently but should be recorded in the business’s accounting records. A general ledger provides a clear view of your company’s financial health and prepares financial statements like the balance sheet and income statement.
Protecting personal liabilities
Liability protection for your business ensures against loss from failed business transactions. If your company has numerous partners, each is accountable for the other’s actions. Various business types offer different liability protections, and the amount of risk determines the protection needed.
Keeping business transactions separate
Registering your business with your state, opening a separate business banking account and applying for an Employer Identification Number (EIN) establishes your business, and proper accounting records keep your personal assets safe from legal action.