Many small businesses suffer an identify crisis – the owner mixes in their personal life with their business life. I once had a client who would use business credit cards for personal expenses, and vice versa. Every month, we had to go through the credit card bill and break out the charges to various clothing stores and restaurants. This also messed up the books and payroll – these charges had to be allocated to his personal income, and somehow added in for tax withholding. It was fun, and sometimes “too much information”.
It is very important that you maintain a separation between your personal and business life for several reasons. For purposes of protecting your assets from creditors or lawsuits, you don’t want someone to be able to “pierce the corporate shield” – that is, argue that since your personal and business assets are intermingled, there is no distinction. Technically, the corporation is a “person” independent from the owners. For tax purposes, a clean distinction also adds credibility to your records, since you are careful about the basics. For tax filings, you want a clean trail so the
Most importantly, you want clean records so you have a clear picture of the practice’s performance. It’s hard to develop good financial reports if they are muddied by misleading record keeping.
If you don’t have a credit card just for the business, get one. Even if it’s technically in your name (you may have to guarantee the card anyway), have the bills sent to your business address and pay the account out of the business account.
Keeping your business and personal affairs separate will actually make your life easier, building the discipline you need to best manage your business. A well run business is one that will also build long term wealth for the owners.