I may have mentioned this before. It came up again this week with not one but two clients. The issue is this: if you have your own business, FOR THE LOVE OF GOD DO NOT COMINGLE YOUR BUSINESS FUNDS WITH YOUR PERSONAL FUNDS.
If you are hyper-organized and keep everything on Quickbooks and properly categorize it between business and personal and give me the file whenever I need it so I can dig around at the detail and fix the things you did wrong (face it, you are not a bookkeeper – that is what you have me for), that may be okay. I am still going to grumble because I have to CHECK to be sure you properly segregated your business expenses.
If, on the other hand, you have a separate bank account so you can give me a file that has business activity, only business activity, and nothing but business activity, my life is much easier. Your life is, too, as a matter of fact. You don’t have to be constantly vigilant about coding to the proper business versus personal category or class.
If cash flow is the issue and you need to use your personal funds to supplement your business because you do not have enough cash to pay bills this month, simply loan your business account money from your personal account. Pay yourself back from the business account when cash becomes available.
Simple. Easy. Separate.
DEAR GOD WHY IS THIS SO HARD TO COMPREHEND?
Imagine, now, that your business is a big corporation with lots of real estate transactions. Imagine further that you decide to start a new corporation to handle your real estate transactions in a state that has no income tax. Rather than open a new bank account for that COMPLETELY SEPARATE CORPORATE ENTITY, just pay everything out of the main corporation. Set up classes for the new corporate activity so you can easily segregate the activity from the main corporation but only use the classes sometimes, when you feel like it, which is only about half the time. The rest of the time, let them post automatically as "Unclassified” along with a bunch of main corporate activity, with no way to distinguish which entity they belong in.
Oh, and be helpful by setting up a separate Quickbooks file for the new corporation and set up balances in a bunch of accounts but do not set up beginning balances from last year’s tax return. Instead, include some of those beginning balances in a big journal entry along with some current year activity, but do not record ALL of the beginning balances or current year activity in the new corporation. Only record some of it and lump it all together so it is impossible to distinguish what is what.
And do not remove the corresponding activity from the main corporation books by posting is to a “due from new corporation” account. Leave it buried in asset, loan, expense, and income accounts over there. Your accountant will be able to figure it out from the supporting documents you send her.
But then don’t send her any supporting documents and, when she asks, only send her some of them.
Include support for transactions from the prior fiscal year that you “forgot” to tell her about last year.
Think this is funny.
Wonder later who could possibly have left the bag of flaming dog poo on your porch.
