Credit card for business expenses: not 100% business OK?
I'm thinking of starting an LLC for my app projects, and I'd like to keep a separate business credit card to make the corporate veil harder to pierce. However, a lot of my business expenses are also partially personal expenses. For example, if I buy a new laptop, I expect to use it 50% for personal use and 50% for work. (I can't afford to have more than one laptop.) Same for software licenses. Is it OK to still charge those expenses to the business card, or should I use a personal card for that? (Because if not, my only business expense would probably be my Apple dev account, and that seems like it wouldn't do much to show me and my LLC as separate entities.)
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You should keep business and personal expenses as separate as possible. Get a credit card that you use solely for business expenses (once you have trading history, you can get a card on the business, rather than your own, which makes life easier). As for "shared" expenses, you should seek the advice of someone familiar with the rules in your jurisdiction, as they do vary. – Steve Jones 11 years ago
1 Answer
When items are shared you do a lease back agreement from the person to the business. For example you setup XYZ INC. You buy a car for personal use but the business needs it on weekends. Your payment for the car is 599 per month + insurance + gas.
Then you Archogon write a lease agreement between yourself and your company to lease the car for $200 month for weekend use. You actually cut a check from your business to yourself. The business gets a $200 write off, but you get $200 additional income on personal taxes.
If you were to write off 100% of any asset in one year you can count on an audit. The way above is the right way to handle it. It saves you a small bit on taxes, allows you to shift income to different pockets, and helps keep clear and proper accounting.
The opposite is true when you as a person make loans to your own business.
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Hey, thanks! I've never heard of this before, but it sounds reasonable. I'll definitely look into it. – Archagon 11 years ago
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Talk to your CPA. With the car example, I know of a few guys who own a "Crap car" for "Personal Use" also keep the insurance lower, but then have a 2nd vehicle for business use with all the business write offs. The smart (rich) guys buy them cash and just lease them from themselves to their company to enjoy the write off at the business level. Its still personal income, but sometimes that is easier to deal with than business income. It all depends on your BIG PICTURE. A Good CPA or Financial planner can save you a few bucks – Frank 11 years ago
