Business Mistakes to Avoid: Failing to Separate Business from Personal

This is such a common mistake for most business owners. There are a variety of ways in which a business owner can make this mistake and odds are any business owner you meet has done at least one of these at some point during their business. It’s understandable enough- many business owners feel that they work so hard, and their business is so powerfully connected to who they are as a person, that its hard to distinguish “business” from “personal” life.

So what types of separation are necessary?

 

1. Failing to separate your business liability from your personal liability.

Far too frequently, entrepreneurs wait to form a business entity. While it might seem like an inconsequential thing in the beginning, I mean you’ve got the great business idea, you’ve got some capital and a cool name, why waste the time and money setting forming a legal entity? In truth, the main purpose of forming an entity in which to conduct your business is to separate you’re your business liabilities from your personal assets. You don’t want potential lawsuits or debts from your business to put your personal assets at risk.

2. Failure to separate your business finances from your personal finances.

As important as it is to take the time to set up the formal business structure, it is even more important to keep your business and personal finances separate. First, if you can avoid it, NEVER sign a personal guarantee. You took the time to set up the business structure to protect your personal assets, why would you turn around and agree to be personally liable for a debt? In your business, its fair to risk your investment of time and money, but you should never lose your house or risk your personal wellbeing. Your business venture should not be able to take your life away and leave you penniless. Second, don’t mix your personal funds with your business funds. There are many reasons for this, but the most important is that you may be at risk of a creditor with a claim against the company “piercing the corporate veil.” Co-mingling business funds with personal funds allows a creditor to assert that you have failed to follow corporate formalities and hold your personally responsible for a claim against your business.

3. Failure to separate business emails from personal emails.

Like a lot of people, I have separate email accounts for work and personal matters. Unlike most people, I am obsessive about keeping the two separate. Lawyers generally behave as if everything they say might be heard by the public, and in the internet age, that’s not exactly paranoia. (In my work as an attorney, I have often had to scour through every email from every employee at a company during a process called discovery). An unwise joke or unfortunate phrasing taken in the wrong circumstance can cause more problems for you (and higher legal fees). During the middle of a legal battle your email becomes fair game and email can live forever, which is quite scary if you think about it. My emails live on my server, and also on the server of anyone I sent them to, cc’d or bcc’d. If I “delete” them, they go to the trash folder, where it might live for another 30 days and get backed up 30 times. Other people might not delete it, and it could lurk unnoticed at the bottom of a long email chain. It can also be forwarded to hundreds of people with the flick of a fingertip, and thousands more within minutes. So seriously, it’s ok to be obsessive about keeping business and personal emails separate.

Now, I need to be clear here, sending a work email through your personal account will not protect it from searches – it will give cause to look through your personal emails as well, which is what you are trying to avoid by keeping them separate. This advice does not only apply to email. In this day and age, so many business owners are guilty of conducting business on their personal cellphones or intermingling business and personal issues on social media. Text messages, online posts, phone records, and pictures have all been subpoenaed before. So, what’s the take away lesson? Treat the internet with respect. In the digital age, be mindful about what you email, text, or post online because the internet never forgets.