Daycare.com Forum
Daycare and Taxes>Paying Mortgage From Business Account-Tom or Anyone else? :-)
newtodaycare22 05:55 PM 01-04-2011
I linked our mortgage payment to start coming out of my business checking account. My company is an LLC but I believe I had to claim sole proprietor in order to get a Tax EIN number. My brother thinks he read something about not being able to pay personal mortgages out of business accounts...for tax purposes? Has anyone ever heard anything about this? I don't want to set my self up for problems. Thanks!
TomCopeland 06:16 PM 01-04-2011
When you set up an LLC (or any other corporation) you must follow the formalities of the corporate status. Keeping a separate business account and not paying personal expenses out of that account are necessary. Otherwise, you can lose your liability protection. Sounds like you are a single person LLC - but you should not pay mortgage payments or any other bill that has a personal use.
This is one of the complexities of becoming a corporation. Although an LLC is the simplest form of a corporation, and doesn't require filing different tax forms, it's still more cost and work to do this. Because of this and because I'm not sure that LCCs will get more liability protection, I generally recommend that providers do not incorporate. For details on this see my book Family Child Care Legal and Insurance Guide.
This is one of the complexities of becoming a corporation. Although an LLC is the simplest form of a corporation, and doesn't require filing different tax forms, it's still more cost and work to do this. Because of this and because I'm not sure that LCCs will get more liability protection, I generally recommend that providers do not incorporate. For details on this see my book Family Child Care Legal and Insurance Guide.
newtodaycare22 06:52 PM 01-04-2011
Thanks for letting me know. This may sound silly...but what can I do with my income then? Can I only withdraw it to deposit in my personal account (and then pay bills from there?)
Abigail 09:28 PM 01-04-2011
Well I started out typing a paragraph using my own words, but then looked it up in Tom's Record-Keeping Book. It's on page 6: When you need money from your business account for personal use, make out a check to your personal checking account, and record it as "Transfer of income." Checks that you make out to yourself are not business expenses, and cannot be deducted. (This is how you pay yourself from your business).
I don't know if you can just save the writing out a check to deposit it step and just withdrawl cash and record it as a transfer of income that way??? Is it okay to withdrawl fund weekly to transfer income and pay ourselves or should we try to limit it to less?
I don't know if you can just save the writing out a check to deposit it step and just withdrawl cash and record it as a transfer of income that way??? Is it okay to withdrawl fund weekly to transfer income and pay ourselves or should we try to limit it to less?
jojosmommy 11:07 AM 01-11-2011
I transfer money from business to personal all the time. I always deposit everything into business then pay myself as needed through a transfer to my personal account. No trips to the bank required and then I can bill pay as needed through my personal account.
Tom- please let me know this is a wise method of keeping track of my money.
Tom- please let me know this is a wise method of keeping track of my money.
newtodaycare22 07:18 PM 01-11-2011
Thanks guys..I think I'll start writing myself a check each week
I would just transfer the money electronically like someone suggested, but capital one won't let me. One is a business account with my business EIN and the other is a personal checking w/my social security...so they aren't compatible. (whatever that means)
I would just transfer the money electronically like someone suggested, but capital one won't let me. One is a business account with my business EIN and the other is a personal checking w/my social security...so they aren't compatible. (whatever that means)
My Daycare 04:04 PM 01-12-2011
If you can't pay mortgage or any other household bills through that account, then can you still claim those expenses as deductions. Also, would we only be able to claim the things that are 100% business if paid from the business account. For example, paper towels, in my home are not 100%, so which account would I use to pay for them and can they still be claimed as a deduction?
TomCopeland 05:16 PM 01-12-2011
Jojosmommy - You are doing the right thing. Run everything through your business account and then transfer to personal as needed.
My Daycare - If you are not incorporated, then it doesn't matter what account you pay for a business expense. You can claim items as 100% from a personal account or business account. It doesn't matter.
My Daycare - If you are not incorporated, then it doesn't matter what account you pay for a business expense. You can claim items as 100% from a personal account or business account. It doesn't matter.