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5 Personal Finance Rules Every Small Business Owner Should Live By
Many small business owners struggle to manage their organization's finances. Rather, they focus
on their business's core operations while placing accounting and other administrative tasks on the
back burner. Unfortunately, this often leads small business owners down the path for failure by
adopting the following personal finance rules, however, small business owners can better
manage their business's finances and increase their chances of success.
#1) Create an Emergency Fund:
Even if they never use it, small business owners should create an emergency fund. It's impossible
to predict the future. Even if a small business is currently turning a profit, factors like market
changes, industry regulations or consumer demand can quickly place a business in the financial
red zone. By creating an emergency fund, small business owners will have peace of mind
knowing that they stay afloat during times of hardship.
#2) Choose Debt Wisely:
There's nothing wrong with borrowing money, but small business owners should choose their
debt wisely. High-interest loans, for instance, can hurt a business's profits. In addition to paying
the principle, the borrower must also pay interest. A small business owner should only take a
loan or debt if he or she can comfortably pay it back according to the lender's terms.
#3) Keep Excellent Financial Records:
Small business owners should keep excellent financial records for bookkeeping and tax
purposes. If a small business owner doesn't know exactly how much money his or her business
spends and earns, they won't be able to optimize their operations for higher profits. Whether it's
performed in-house or outsourced to a professional accountant, proper bookkeeping is essential
to the success of all small businesses.

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#4) Plan for Taxes:
Waiting until April to review taxes for the year prior is never a good idea. As a small business
grows, it will earn more income and, subsequently, be required to pay more taxes. To avoid the
sticker shock of an expensive tax bill, small business owners should plan for taxes in advance.
This means setting aside the necessary funds -- usually about 35 percent of income -- for their
taxes. In most cases, small business owners must make quarterly estimated payments to the
Internal Revenue Service (IRS) based on the projected income for the year, and failure to make
these payments will result in a penalty.
#5) Plan for Retirement:
Retirement isn't something that most small business owners think about when initially launching
their business. As most financial experts know, however, the sooner you begin planning for
retirement, the better. Even if a small business owner doesn't have employees, he or she can still
set up a retirement plan using a Simplified Employee Pension (SEP).
The same rules used for personal financing can also apply to small businesses. By incorporating
the rules mentioned here into your small business's operations, you'll build a more stable
foundation that allows your business to expand without the traditional growing pains experienced
by so many others.
Yorkville Advisors, LLC is a privately owned and operated hedge fund sponsor that was founded
in 2001.