Today we’re chatting all about business expenses and whether you can charge them to personal cards/accounts.
I’m not sure if you caught it yet — but I just chatted with CPA Keila of Little Fish Accounting on my podcast, On Your Terms, about business expenses, quarterly taxes, and more a few weeks ago! Listen here.
Oh and here’s the deal with my Q&A’s– if you have a legal question, you promise to hit “reply” and let me know what it is so I can answer it in a future Sam’s Sidebar 🙂
And I promise I’ll show up each week and offer the best legal tips for online businesses. It’s easy breezy 🙂
Let’s jump into our legal Q&A sesh! 👇
The Question // Karol asks,
I’ve set up as an LLC and I’m paying my business bills with my personal credit card. Do I need to create an invoice from me to my LLC for all the things I’ve paid for personally throughout the year? These payments are for yearly charges for domain name, web page service, USPS mail box, registered agent, business cards, etc.
The Answer //
Alrighty – let’s talk business expenses and how to pay for them!
Once you’ve setup an LLC, you need to setup a business bank account (which is just a regular checking account that the bank labels as being for your business).
✅ That’s the account where any and all money you make in your business (ie., revenue) goes. From that money, you’ll pay for your business expenses like the ones Karol listed: domain name purchases, software costs, contractor payments, equipment, etc.
When you setup your business bank account, the bank should give you some sort of business debit card you can use to charge your expenses to. When you’re starting out, it can be hard to qualify for a business credit card — so these business bank account debit cards are the next best thing.
❌ You should not pay for your business expenses through your own personal cards or accounts. It’s confusing and messy, but it also puts your business at legal risk if anyone ever challenged your LLC.
We always want to act like an LLC so that we maintain the protection we think we’re getting from it. And paying for things correctly and “cleanly” (through your business, and not personal, accounts) is one of the major ways how we act like an LLC.
Occasionally, you will make a mistake and accidentally charge a business-related expense to your personal card/account. Those mistakes are OK! But we don’t want to default use our personal cards for everything without trying to pay for them with our separate business cards first.
If you do make a mistake like this ^, just keep the receipt and record the transaction right away in your bookkeeping software (or let your bookkeeper know).
💰 Taxes & Business Expenses: learn more
Want to learn more about business expenses, what counts/what doesn’t, and how to actually pay your business taxes? I just did an episode with CPA Keila Hill-Trawick of Little Fish Accounting that you can listen to here.
PS: What Can You Do Legally if Your Client Quits? This week I answered a reader’s question on what you’re allowed to do as a coach/provider if your client quits on you. Do you have to give a refund? Should you be worried about getting sued? Dive in to this mini episode – LISTEN HERE! 🎧