Don’t blur the line between home and business. Separate personal finances from business finances.
Separate accounts enable you, your tax preparer and the IRS to easily distinguish between what’s business and what’s personal. Business expenses are deductible for tax purposes, while personal expenses generally aren’t.
Establish a separate bank account for your business, for writing checks and making deposits of business revenue. Obtain credit and credit cards in your business name, so charges, advances, loans and other banking transactions can be identified with your business, as opposed to personal uses.
Most banks require evidence such as a fictitious business name to open a business account. You may choose to use the same banking institution you use for your personal finances, which makes it convenient for moving money back and forth, such as when you pay yourself a salary, or when you need an infusion of cash to cover unexpected expenses.
Some home-based business owners with no employees use their Social Security number for tax purposes. You may need a separate Employer ID Number (EIN).
If you answer Yes to any of these questions, you need an EIN:
Do you have employees?
Do you provide health insurance for employees?
Do you operate as a corporation or a partnership?
Do you file tax returns for employment, excise, or alcohol, tobacco and firearms?
Do you withhold taxes on income, other than wages, paid to a non-resident alien?
Do you have a Keogh plan?
If you are involved with any of the following organizations, you also may need an EIN:
Trusts
IRAs
Exempt organization business income tax returns
Estates
Real estate mortgage investment conduits
Non-profit organizations
Farmers’ cooperatives or plan administrators
The IRS has guidelines for EINs. For more information go to www.irs.gov/businesses/small/article/0,,id=98350,00.html.
Another financial consideration is whether to obtain a Dun & Bradstreet D-U-N-S Number, which is a unique nine-digit identification sequence for identifying businesses. The number represents a file maintained by Dun & Bradstreet with basic information about your company.
Having a D-U-N-S Number is said to enhance your business’ credibility by enabling potential customers, suppliers and lenders to easily identify and learn about you. The U.S. government and many major corporations require suppliers and contractors to have a D-U-N-S Number. You also can establish a full D&B credit file for your business, which also can be accessed by others to determine your creditworthiness.
