Question # 6 - My biz is small. Do I need a separate bank account?
Short answer: HELL YES!
One of the most important things you can do as a small business owner is to separate your business from your personal finances. YES, stop using the business accounts to pay for Chipotle!
According to a 2015 TD Bank Survey, 56% of small business owners use their checking account both personal and business. This is called co-mingling and it is NOT GOOD.
When you commingle the two, you waste hours sorting through bank and credit card transactions to hand then correct amount to your CPA to file taxes. Or worse, you make them do it and their hourly rate is likely higher than yours.
You also open yourself up to an IRS nightmare if you were to be audited! They could ask for years of personal and business records to decide if they will allow or dis-allow a business deduction. Do you really want to do that?
If you want to save time and pay fewer taxes, take the time to open a business bank account and a separate credit card to keep your personal and business dollars separate. I am a huge fan of Profit First, which uses multiple bank accounts to manage cash flow. I will be writing more on that at another time. While you are at the bank opening the business checking account, open up a business savings account and call it PROFIT and another business savings account called TAXES.
Every week, your business should put some money (start at 1%) into the PROFIT account and 15% into the TAX account. Leave the rest in the business checking account for the businesses expenses.
If you wan to know more about Profit First or how to manage your cash flow, book a call with me at www.speakwithdiana.com
NO MORE CO-MINGLING!!!