Maintaining your books isn’t something you should do solely as a tax-savings strategy; it can also prevent you from losing your sanity and getting dragged into a potential lawsuit over commingling your funds. Here are five significant reasons for maintaining a separate checkbook and set of books for each of your businesses:
1. Corporate veil. First and foremost, maintaining a separate checkbook substantiates the corporate veil, one of the primary reasons for forming a new corporation. Having a separate checkbook shows you recognize the company is its own distinct entity. Furthermore, separate checkbooks will hopefully encourage you not to commingle personal and business funds.
2. Tax savings. Separate banking will improve bookkeeping procedures, prevent payments from being missed, and provide better records to improve your tax return.
3. Audit protection. Having a separate checkbook will improve your chances in an IRS audit. The IRS will often disallow a number of expenses when personal and business expenses are commingled in a single checkbook.
4. Less stress and more sanity. One might think having separate checking and bookkeeping for a new company is cumbersome, unnecessary, and possibly even a waste of time. In fact, this procedure saves time and money in the long run. When your books are disorganized, you’ll feel constant stress to take care of it, and this ultimately can cause you to feel undone.
5. Improved decision making. Having a separate checkbook starts the process of better bookkeeping, expense tracking, and budgeting, which leads to quality decision making. How can you expect to be a successful business owner without accurate records? You owe it to yourself and your business to keep good books.
The next step is implementing a system for tracking income and expenses. It’s absolutely critical for small-business owners to at least consider QuickBooks as their primary accounting software system. Yes, there are a few alternatives to QuickBooks, but not many, and even fewer worth considering.
QuickBooks is the most affordable, user-friendly, efficient, and effective accounting software ever written. That may sound a little cheesy or over the top, but it’s true. Here are just a few things that QuickBooks can do to help you become a better, smarter business owner:
- Keep essential information at your fingertips. QuickBooks generates reports that allow you to easily stay abreast of your business’s most important financial information, like profit and loss by product or property, accounts receivable by customer, sales reports, or expense reports.