Many business owners start their business using personal funds and credit cards for startup costs and initial operating funds. BAAP CPA recommends that you set up a checking account that is separate from your personal account and we also recommend getting credit cards in the business name if you are able.
As your business grows it is important to separate those business expenses from the personal ones for several reasons.
First, if your business is a sole proprietorship there is no legal distinction between you the owner and the business, so it becomes important to keep the business finances separate in the event of an IRS audit. If your business is a corporation, you must keep the business finances separate because the business is considered a separate, legal entity.
First, if your business is a sole proprietorship there is no legal distinction between you the owner and the business, so it becomes important to keep the business finances separate in the event of an IRS audit. If your business is a corporation, you must keep the business finances separate because the business is considered a separate, legal entity.
Second, many business owners are multi-tasking and maintaining separate accounts dedicated to the business activity helps you get organized and saves you time as you gather your tax information for your accountant. Organized records can make it easier for your favorite accounting firm, BAAP CPA, to prepare your taxes which can save you money on the fees charged.
Third, business expenses that are comingled with personal expenses can easily be overlooked if they are included in a personal account with other non-business expenses. A missed business deduction hiding in a personal account can result in overpaying your taxes by more than 40%!
Last, as a business owner it is important to have good information upon which to make informed decisions. If you maintain accurate records of your income and expenses you can get a better picture of your company’s financial performance. This helps you manage the company performance and help you achieve a higher, post-tax net worth when you want to exit the business and get rewarded for all of your hard work.
And that was another Question ForMy Account. If you have a question call on BAAP CPA and let us show you the way.
