One of the biggest irregularities that I see are the mixing of personal and business expenses. It starts with simply using the business account to pay for every personal expense. There are two things mixing personal and business causes:
- Your liability protection from your LLC or Corporation is void
- Bookkeeping becomes a lot more time consuming
Clients setup an LLC or Corporation to protect themselves from any lawsuits. Instead of your personal assets up for grabs, only your business assets would be eligible in any lawsuit. By mixing personal and business expenses, you are “piercing the corporate veil.” You are showing the courts that your LLC or Corporation is not a separate entity because you are mixing personal and business.
Don’t have an LLC or Corporation, then you still want to keep personal and business separate. This would save a ton of time doing your bookkeeping. Instead of worrying, “Ok was this for business or not?”, keeping everything separate would never cause yourself to even ask this question.
As the new year approaches, it would be important to start separating personal and business. Need to pay yourself? Move money from your business account to your personal account and pay the personal expenses there. Are you a corporation? Then the salary from your corporation should be funding your personal account.
Any questions? Feel free to contact me.
Best,
Leo