Tax time is upon us and now is the time of year that many business owners find themselves reviewing their business and personal expense records. Unfortunately, it can also be the time that they may be realizing that they should have been better about separating the two. It is not uncommon for small businesses to have instances in which their business expenses overlap with their personal. This makes it even more important for the owner to make sure that the lines between personal and business do not get blurred. Otherwise the business owner can end up with very confusing records that could potentially cause problems with their taxes or keep them from being able to declare specific write offs.
Another important reason to establish distinct business and personal expenses is so that, as a business owner, you can effectively create and maintain a “corporate veil.” The “corporate veil” allows the property of a company to be seen as noticeably separate from the property of an individual. This means that your individual property would be better protected if your business ever found itself subject to legal proceedings.
In consideration of this “corporate veil” you will want set protection for you and your company’s assets. A sole proprietorship will follow different rules and be treated differently in a legal proceeding then an LLC or Corporation. When setting up your business make sure that you understand the differences and follow the regulations according to your declared company status. Make sure that your LLC or corporate status is well known to all you deal with.
Other steps to make sure that your “corporate veil” is well defined is to document all of your business actions and completely avoid mixing your business and personal assets. This does not have to be difficult or complicated. Getting advice early on, when you first structure your business, and fully understanding the rules and regulations that apply to your business status is key in keeping yourself protected.
Contact us today if you have questions or need any advice about how to protect your company and yourself by setting up a strong corporate veil. https://jhrlegal.com/small-business-law/