Handling business expenses

With a single-member LLC what is the best way to handle business expenses? Should I pay directly out of my business checking account, use my business credit card, or pay personally and then get reimbursed? I am handling the accounting on a cash basis.

From the point of view of claiming the expenses, it really doesn't matter which method you use to pay: what is important is having receipts for every expense. Make sure those receipts are made out to the LLC.

For your tax returns they look at receipts, not which account you paid from. (A common mistake is to pay for things with your business credit card and then think the credit card statement is proof that this is a business payment: it isn't, according to my accountants.)

From the point of view of convenience of your personal accounting, a business credit card and paying from your business account can really help. Otherwise you have to manually go through your credit card statement every month to figure out what are business expenses. From personal experience, that task often gets put off for months, meaning I get my expenses reimbursed months later.

From the point of view of 'piercing the corporate veil' which a commenter mentioned, I can't comment. I would think so long as you make sure all the receipts are made out to the LLC you should be fine (certainly don't get receipts for business expenses made out to you personally - then it's not clear it's the business's expense - though this might be fine for business travel). A lawyer could answer better than I could. I'm just an experienced entrepreneur.

I have to disagree with it not mattering about which account you use. Aside from it be far easier to have a business and a personal account when it comes to keeping books and filing taxes, the IRS frowns on "co-mingling funds". And indeed, one of the hallmarks of "piercing the corporate veil" is not keeping personal and business accounts very separate.

There is no problem with the company reimbursing you for incidental expenses you incur in the course of business, (cash paid for parking, for example, and for which you have receipts). This should be done by the company writing you a check or transferring funds from the business account to a personal account for valid business expenses.

Other than that, the business bank account or credit card should pay for business expenses, and the personal bank account should pay for personal expenses. The business can pay you a salary or you can take draws from it. You seriously need to get with a good bookkeeper or learn some accounting yourself. Not to worry - you aren't the first to start his way and it's all fixable, but you are wise to have raised the question.

I do similar. But I try to avoid the pay with other personal funds and get reimbursed or flag it as seed money. When I need extra cash I usually do an online move from personal to business checking and add a note as "seed money".