Refrain From Using Your Business Checkbook Personally

In preparing your tax return we noted there are a lot of personal transactions that are flowing through the company checking account or company credit cards. There are many reasons why this is not a good business practice:

1) It makes for more complicated bookkeeping since personal transactions are not deductible and need to be accounted for as such.

2) If these personal transactions are treated as distributions this can lead to uneven distributions which may cause issues depending on your entity type and/or operating agreement.

3) If you decide to sell your company it is possible that outsiders may be wary of company records and the validity of company expenses.

4) It is possible the IRS could more closely scrutinize the validity of your business deductions.

We recommend all personal expenses be paid out of personal accounts. If amounts are required from the company to cover your personal expenses, the company should write you a check (in the form of payroll, distributions, draws, or guaranteed payments as applicable) to deposit into your personal account.