Mixing Business & Pleasure, Bank Accounts & Bono
This July, I received my renewed CPA license, and I reflected on the day I dropped off the application. It was June 6, 2001, in Boston. U2 was in town for their Elevation Tour, and Bono was addressing the Harvard grads at lunch time. Somehow, a coworker and I got press passes to the event. Score! The only good picture I have of the event was taken on a 35mm camera and is buried in a closet somewhere… When I find it, I’ll share it with you. Bono was looking right at me!
Bono and U2 have had a big impact on my life and career, since the 7th grade when I fell in love with The Joshua Tree. A few of the highlights:
- My first job was with Ernst & Young, in England, to get me closer to Bono. I know. England is not Ireland. But I was 22, but it was a close second for a girl who had only left the Midwest once before!
- After moving to Boston, I eventually took a job which required traveling to Dublin. Now we’re talking! Yes, I did go to Bono’s house. In a stalking sort of way. Through the keyhole of the 8’ tall beautiful copper gate, I could see... a dumpster. He was doing home renovation. Not what I was hoping for, but it would do.
- Now my almost 3-year-old daughter loves U2 also. Her favorite video is New Year’s Day because of the horses. She'll know every song in no time!
When it comes to business and pleasure for your career or your business, it’s great to find a way to comfortably mix (a) a profitable activity with (b) an activity that you enjoy and (c) people will pay you for it.
When not to mix business and pleasure? When it comes to your business bank account. Recently, I’ve helped several entrepreneurs see the light... In this week’s article, we’ll talk about why your biz needs a dedicated checking account.
Some of my clients have done these no-no’s:
- Have automatic withdrawals for personal expenses come from your business checking account. I’ve seen monthly daycare expenses, car payments, rent payments, etc.
- Have business income be deposited to your personal account. This is a definite no-no. The IRS will have a field day looking thru all your accounts, to make sure that all income has been taxed.
- Use your business credit/debit card to pay for personal transactions. Even if personal transactions are properly classified to Owner’s Draw, there is the potential for abuse when it comes to the interest expense (which is deductible on business loans like credit cards).
But it’s such a hassle to keep it all straight! Here are a few things to consider before you make another personal purchase with your biz debit card:
- If you’re audited by the IRS, think of how much fun they’ll have pouring over your business and personal accounts. They’ll check all your accounts to make sure that you properly recorded all your business income on your tax return.
- Think of how much fun you’ll have if you’re selected for an audit. You will have to prove that a deposit to your personal checking account was not business income, but was in fact:
- Owner’s draw that was legitimately transferred from your business account to your personal account.
- A gift (cash or check) from a friend or relative (because you always keep a photocopy of any checks that you receive as gifts, right?? I didn’t think so).
- Income earned by your spouse or another business you have.
Still not convinced? Aside from the potential IRS headache, it’s really hard to manage cash flow for your business when you muddy the waters with personal transactions. You need a good handle on your numbers in order to plan for and grow your business.
To run your business like a business, you need to give it the TLC that it deserves. That includes a separate checking account (with debit card) to use for any type of business expense. Ditto for credit cards.
What should you do instead?
- Use business accounts for business expenses only.
- Pay yourself a salary in the form of Owner’s Draw (for sole-proprietorships). Write yourself a check, enter “Owners Draw” in the memo. Deposit it into your personal checking account. Not sure how to do this? Check out my Summer Sale on QuickBooks Tune-up, and we'll get you straightened out in no time.
- For personal expenses, use your personal debit card, credit card, or personal cash.
If you’re still mixing business and pleasure, it’s time to start shopping for a business checking account that will serve your business. Stay tuned for next week’s article about selecting a business checking account.
In the meantime, I’m going to hunt down my Bono pictures. UPDATE: FOUND THE PICTURE of me at Bono's house (in a non-stalker-like fashion).