J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Setting Up a Business Bank Account and Credit Card

Once you have set up your business and obtained your tax identification number, it is highly advisable to set up a separate business bank account. Use this account exclusively to deposit business receipts and to pay business expenses. Do not commingle the funds in your business bank account with your personal money.

If you are self-employed, it is also advisable to set up another account for your personal estimated taxes. Use this account to set aside the funds needed to pay your quarterly estimated taxes. Often small-business owners who were formerly employees of large corporations that had withheld income taxes on their behalf are unfamiliar with estimated tax requirements on their share of business income and can fall short of the money needed to meet this tax obligation.

It is also a good idea to use a separate credit card solely for business purchases. Having both a separate business bank account and credit card simplifies recordkeeping for your business. Further, it helps to show that you are running your company in a businesslike fashion in case the IRS questions whether losses should be disallowed under the hobby loss rules (see Chapter 26).