Personal vs Business Finances
You can pay business expenses from your personal account. However, it’s best to keep personal and business finances separate. Commingling finances makes you vulnerable if audited or you default on terms. Both your business and personal finances would then be reviewed.
Separate Accounts for Efficient Recordkeeping
Personal accounts are for personal finances like your salary and daily expenses. Business accounts handle business finances like paying for rent and supplies. Business accounts allow checks with the business name.
Tips for Managing Small Business Expenses
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To track small business expenses: open a separate business bank account; use a dedicated business credit card; choose accounting software to track expenses.
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For personal account payments of business expenses: Create a "reimbursements" account to track amounts reimbursed or not.
Frequently Asked Question
Can I use my personal account for business payments?
You can pay business expenses from your personal account. However, it’s best to keep personal and business finances separate. Commingling makes you vulnerable if audited. Both finances would then be reviewed.
Personal accounts handle your salary and daily costs. Business accounts pay for rent and supplies. They allow checks with your name.
Money from personal accounts used for business is business income. Personal expenses usually aren’t tax deductible. Separate business and personal accounts simplify recordkeeping.
Employee meals may be deductible. Personal expenses paid from business accounts can reduce owner equity.
Open a separate business bank account. Get a business credit card. Use accounting software to track expenses.
Avoid using one account for both. That can increase tax scrutiny of personal funds. Claiming expenses is tricky. Using your account blurs lines.
Transfer money from personal to business accounts through services. Register both accounts to transfer between them.
Track reimbursed and unreimbursed amounts.