Today TaxMama hears from Jeff in the TaxQuips Forum, who is unclear on the concept. Let’s look at just a portion of what he said. Jeff said, “My S-Corp does not have a separate checking account.”
Dear Jeff, excuse my shock, but…
WHY IN THE WORLD DOESN’T YOUR S CORP HAVE A CHECKING ACCOUNT?
Go out and open one immediately!!!!!!!!!!!!!
This is addressed to everyone who started an LLC, partnership, corporation, S corporation, exempt organization, or any other business.
When you start a new business, especially one that is registered with IRS and/or your state, you absolutely must open a separate bank account for it. You cannot legally run it all out of your personal checking account.
What happens when you do? None of the income or expenses that you believe, in your own mind, belong to your business, is any part of your registered business. You have blown it!
All those activities will have to be reported on your personal Schedule C. You lose all the tax breaks you might have gotten with your entity – and all the liability protection you had hoped to gain by setting up the legal entity.
Not only do you need a bank account, you need a set of books. And it can’t just be part of the accounting you were already doing when you were running the business before registering your LLC, corp, etc. It needs a whole new set of books.
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It’s a whole new entity.
If you’ve done the same thing Jeff has done – and I know how common this mistake is – go out and fix it. NOW!
And remember, you can find answers to all kinds of questions about running a business and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.
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