Are you ready to make some simple changes to help you manage your taxes and grow your business? There are a few things you can implement that can make a big difference in your business success (and streamlining the tax filing process) and ultimately make your life that much easier. Look around! It is 2019, and we have every resource at our fingertips, and it is up to us to be sure we implement them.
So, let’s begin…
According to a survey done by Citizens Bank, 26 percent of small business owners were using a checking account to manage their business and personal finances. This is a mistake. We understand it might be tempting to use a personal checking account to manage your business finances as a business owner – whether you are self-employed, incorporated or have an LLC – but there are much better ways to manage your finances without mixing up your accounts! Plus, in many states, the corporate veil can be pierced if you are commingling your funds! Here are some effective ways to keep your finances separate:
A separate dedicated checking, savings and credit card account used solely for your business expenditures means you’ll have the credit card and bank statements you need to file your taxes easily. It will allow you to get those valuable deductions and refunds to use for your business. Having a system of filing business receipts at your fingertips – or scanning and storing them digitally – can make tax time easier to navigate. And if you have an accounting or expense tracking software, even better.
Remember, if it is a business expense, then it should be categorized as such, and if it is a personal expense, then it should remain just that! If you are not sure what is a business or personal expense, contact your CPA or accountant to know for certain what should and shouldn’t be paid out from the business checking account. This will help to avoid commingling your business and personal funds.
Cash Flow Visuals
Tracking monthly cash flow is easy for those business bills that are paid on the same day every month if they aren’t mixed in with a personal account. You want to be able to track and manage your business cash flow easily while also making sure there aren’t potential issues that could pop up and cause errors. Tracking business cash flow can help you figure out where you can save money so you can move the business forward when ready. Cash is king, so make sure you track every single day, week and month of exactly how much you have!
Should you ever be audited by the IRS, a separate business checking account will simplify the process and make it easier for you. If you mix business accounts with personal accounts, transactions can accidentally be filed in the wrong category. Since IRS audits typically involve giving them your bank statements, it’s best if it only contains business transactions. Then they aren’t scrutinizing your personal finances unnecessarily. You’ll also want to have a paper trail documenting your business deductions, showing the amount, date, place and purpose of the expense.
Business Credit & Profile
Securing funding for your business – especially without a personal guarantee – won’t happen if banks don’t have a credit history to view. Don’t go the route of many small businesses by relying on your personal credit cards and assets to finance your business expenses, at least not if you are planning on applying for loans or credit. Having a business bank account, along with a credit card for your business, can increase your credit limit. It will help you later if want to invest in a big-ticket item at a lower interest rate thanks to your business history and profile.
Do you need to update your business classification? For example, if your business has grown, you might want to file your taxes as an LLC versus a sole proprietorship. If you are already being taxed as an LLC, then you might want to be taxed as an S Corp or even a C Corp. This allows you to take advantage of applicable tax savings. If you are a corporation or LLC, by law, you will need to separate your business and personal finances with your own bank account and tax ID number (see a common theme with this blog). The great thing about this is that it will also minimize your personal liability in case you are ever sued, so they can’t collect on your personal assets.
At Corporate Capital, we have been helping business owners save the hard earned money they make. Whether you want to set up a Nevada LLC or a Wyoming corporation, build business credit, secure business loans, or prepare your corporate or personal taxes, we are here to help! No matter what stage your business is at, our team of licensed professionals and experts can help you. To get ready for the next tax season and maximize your savings, we invite you to call 855-371-0070 to book your consultation – it’s FREE! Located in Las Vegas, NV, but serving all 50 states, you can join the more than 13,000 clients across the country currently working with us. Wherever you are in the United States, we look forward to helping grow your business!