Posted on March 16, 2016 @ 09:45:00 AM by Paul Meagher
If you have been self-employed for awhile there is a good chance that
will end up owning more than one business entity which you are deriving
an income from or which you are investing money into starting up (and
want to claim those expenses).
I personally have three businesses and resisted the urge to
complicate my banking by setting up a separate bank account and
a separate credit card for each account. It seemed crazy that
I would need 4 banking accounts (which also includes my personal banking account) and 4 credit cards to manage my accounting properly so I resisted setting up a banking account for one of my businesses and getting a credit card for two of my businesses. I convinced myself that all I needed was a "personal" and a "business" credit card. I also convinced myself that I didn't need a bank account for one of my businesses because I was investing money from my other businesses into getting it started and until it was a "real" business I would hold off on setting up accounts.
The fact is that not having all of these banking accounts and credit
cards made my life more complicated because it made it more difficult
to create a proper accounting trail of where money was coming from and
where it was going to. So yesterday I started the process of setting
up a new bank account and two new credit cards. In the future if I decide to setup a new business it will be with the knowledge that I will need
to also setup a banking account for it and a corresponding credit card.
The credit card is not because I'll need the extra credit, it is simply
that purchasing by credit card is often the most convenient way to make
purchase and record it to a specific business entity.
So my advice to anyone setting up a second business is to make sure you setup a new banking account and a new credit card for your new business right away so you can use them to create an easy-to-follow accounting trail for your new business. Don't make the mistake I made and imagine that your banking will get more complicated because you have more accounts and cards; it will actually get easier because the accounting side of your business will get easier and more justifiable.
The rule I now follow is:
1 business entity = 1 bank account + 1 credit card.