I often see business and personal finances intertwined. Even if you’re just starting out, it’s essential to keep business and personal finances separate and its not just to make your bookkeeper happy 😉 Mixing the two means a mess at tax time; a red flag for CRA auditors.
3 STEPS to keep business & personal finances separate.
1. Use separate chequing accounts.
One for business and one for personal spending. This is not only tax smart but improves organization and time and who couldn’t use more of that?!
At the end of the year, all your income and expenses will be in one place, making record keeping and tax filing easier, more accurate and less costly (no lost or forgotten transactions). Keeping good records year-long will give you proof of your business expenses if you do get audited.
2. Use a business credit card.
This will again help your record keeping and could give you an extra tax deduction. If you need to carry a balance on your business credit card, that’s the only credit card interest that’s deductible as a business expense. So keeping it separate from personal allows you to claim it.
3. Keep, organize and record all business transactions on a regular basis.
Having a chequing account, credit card and good record keeping exclusively for business will help to avoid fines and interest for missed payments, allows you to easily know how your business is doing financially and will give you most of what you need to file your taxes and to prove to the CRA that your business is really a business.
Contact me: Jessica Lee @ Paper Plain.