Keep Business and Personal Expenses Separate
Small business owners often begin their business enterprises using their own funds and personal bank accounts. The important thing to remember is not to let this go on for too long.
A business expense reduces the amount of income that you will pay tax on. It makes sense that you will want to claim whatever legitimate expenses you can. It is important to record these expenses accurately as you don’t want to create a CRA investigation into your activities.
Business and Personal Bank Accounts
Set up a business bank for the daily operation of your business activities, such as depositing income and paying for rent, office supplies, and inventory. Use a separate account for your personal activities, such as buying groceries and clothing. If you keep things separate, you save time later trying to remember what you purchased at Walmart last July.
Business and Personal Credit Cards
Using the same logic as with a bank account, use one credit card for your business expenses, such as a trip to the office supply store, and another when you visit a salon. This makes things much easier when you review your statements later.
It is advisable to separate a portion of your income into a separate bank account or to make installment payments for income tax or GST/HST. Those funds don’t belong to you, and it is important that you have funds available when the debt becomes due.