One of the trickier parts of an eCommerce business is handling all of the financial matters. It becomes even trickier when you incorporate your business or become involved with other businesses. However, you can avoid some of the more common pitfalls by remembering these things:
Set Up a Separate Business Account with PayPal
It is essential that you set up a separate business account with PayPal. As tempting as it may be, do not use your personal PayPal account to accept payments or handle any financial matter for your eCommerce store. In many states, this is seen as a blurring of the corporate, business, and personal identities. When you have such a blurring, your creditors can then step in and claim they should be allowed to seize your personal assets to satisfy any debts your business may not be able to pay. Set up a completely separate business account with PayPal that is linked only to your business bank accounts.
I have a completely separate account that I handle all finances to do with the SavvyScot in!
Keep All Receipts for Business
The IRS only requires that you save receipts for business items that cost $75 or more at the initial tax preparation and submission. However, if you are audited, you have to demonstrate where every cent went. Make this easier on yourself by keeping all receipts for your business activities. It helps if you keep notes attached with each receipt that explains what the items were used for, such as Google Merchant Center or AdSense. To save space, keep all of these receipts in virtual form. The IRS does not require the originals. The copies just have to be legible. Simply scan them or take photos! Simples!
Maintain Records of All Business Activities
Business formalities play a tremendous role in maintaining your business privileges and maximizing business exemptions. To accomplish this in most states, you must make sure that you keep records of all your business related activities. The records include everything from sales, purchases, meetings, taxes, and more. Essentially, it forms a paper trail that people can follow through all the stages of your business.
Just as receipts do not have to be original, business records can be virtual as well. Keep these in a confidential location as most of your business records will contain key facts and financial data. Encryption may be your best choice. Do not keep these records are files with your personal files, as in some states, such as Tennessee, even this may be seen as a more minor form of identity blurring.
You don’t want to lose your corporate protection for your business exemptions. To maximize on these, you must make sure that you take the appropriate steps. You must always make sure that business transactions are handled through a separate business account, and that means your PayPal account must be a business PayPal account rather than your own personal PayPal account. You should also keep all receipts and maintain business records. Records can be maintained in a virtual form, taking advantage of new technology, in order to save space and make filing easier. Keeping clear and thorough records of all business transactions is vital to keeping your finances organized.
How do you manage your company / blog / personal finances?