This week I want to talk about Form Over Substance. Some of our new clients have co-mingled their personal expenses and funds with their business funds. With the recent IRS audits and the Inflation Act of 2022, we’re observing some business practices that we’d like to highlight for all business owners:
1. Make sure to have separate bank accounts and credit cards for your Business and Personal use. When you start your business, you have to make sure that you open a separate bank account and credit card which you will use for all charges and expenses for your business. Using your business credit card for personal expenses and vice versa will be problematic for you and us, your accountants. We definitely don’t want to see personal expenses when we do the accounting audits for your business and I’m pretty sure you wouldn’t want anyone looking into those either.
2. Have a paper trail when you give personal funds into your business. Don’t pay vendors directly from your personal bank accounts. Transfer those funds into your business account and then pay your vendors so that it’s reflected that the funds came from your business account. All matters- from revenue, expenses, and profits regarding your business must be reflected on your business accounts only.
Even if you’re just starting up, you need to have that focus to dream big. This means that you operate like a big & successful company even on Day 1 so that in the long run, your financial operations are set up the right way.
Watch our YouTube video to learn more: https://youtu.be/8cTCOEu1lL8
CPA On Fire is an online accounting firm for online entrepreneurs. We have extensive knowledge on working with entrepreneurs who have businesses in the ecommerce, coaching, and other online business communities. If you are looking for a highly qualified and experienced accountant, let’s connect! We will show you what we can do for your business to help you grow exponentially.