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The Importance of Separating Business and Personal Finances for Healthcare Professionals

As a healthcare professional, it can be tough to separate your business life from your personal life. You may work long hours, see patients on what should have been a day off, or spend your free time furthering your education and career. Your finances are one area where it’s not acceptable to blur the lines between business and personal. We’ve previously discussed the importance of carrying separate personal and business credit cards, but that’s not always enough to keep your finances secure when you own a small business. In this post, we’re outlining how to take this concept a step further and separate all aspects of your financial health.

Get an Employer ID Number (EIN)

As soon as you decide to strike out on your own, whether you’re starting a private practice or doing independent work on the side, you should apply for an employer ID number, also known as an EIN. An EIN is used in place of your social security number for business identification and transactions. You can apply in minutes on the IRS website and receive your EIN in no time. By using this unique identifier in place of your social security number, you’re both protecting your personal identity and creating a barrier between your personal financial activity and your business financial activity.

Set up a Business Bank Account

Having a business credit card is a great first step, but you also need to set up a separate checking account for your healthcare business. All business transactions should either go through your dedicated credit card, or this separate checking account. You can pay yourself a salary from this account by writing yourself a monthly check or setting up a regular wire transfer to your personal account. This makes it easier to keep track of business spending and keeps your personal account secure and separate.

Make Your Business Official

Before you start seeing patients, set up a corporation or an LLC for your healthcare business. This establishes your practice as a separate legal entity, and can help protect your personal assets in the event that your business fails or faces legal action. Setting up a corporation or LLC also makes it easier to keep your finances separate; any business transactions should be made under your official business name, making them easily identifiable as business expenses rather than personal expenses.

 

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