This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Small Business Owners Risk Heavy Penalties And Professional Fees By Mixing Personal And Business Records

CIBC provides advice to entrepreneurs on how to manage their books when making the leap from employee to owner

TORONTO, Oct. 3, 2012 /CNW/ - Combining personal and business accounts is one of the most costly mistakes many new business owners make - a mistake that can cost thousands in tax penalties and professional fees, says CIBC's Jamie Golombek.

In a report focused on helping small business owners avoid key taxation mistakes, Mr. Golombek writes that while business owners may find it easier to deposit cheques to a personal bank account, or to charge business expenses to a personal credit card, these decisions can put them at risk. He notes that sorting out what is a business expense and what is a personal expense at tax time can be tricky and individuals can inadvertently deduct an ineligible expense - a mistake that can cost them thousands of dollars.

"There is a lot to learn when starting your own business and there is plenty of room to make mistakes but one of the worst mistakes and simplest to avoid is not mixing business and personal expenses together," says Mr. Golombek. "Having a separate bank account and credit card for a business will make tax time a lot easier and can also come in handy in the case of a Canada Revenue Agency business expense audit down the road.

"If you own a business you are required by law to keep adequate records," says Mr. Golombek. "Failing to do so can cause extra hours of paper work at tax time instead of focusing on your business and you could end up having to pay tax penalties."

To make sure this does not happen, Mr. Golombek suggests the following tips.
  1. Keep personal and business separate. One of the easiest and best ways to distinguish business from personal expenses is to have two separate bank accounts: a personal account and a business banking account.
  2. Keep good records. If your business is small and you do choose to manage your business finances together with your personal account, it is important to clearly define which charges are for business purposes, since these can be deducted on a tax return, and which charges are non-deductible personal expenses.
  3. Seek expert advice. Surround yourself with a team of advisors that you trust including a business banker, tax and legal professionals, prior to starting your small business.

"Taxation rules for businesses are quite complex and can change regularly," adds Mr. Golombek. "It is important to understand what the tax rules are, or better yet have an expert to look after your taxes for you."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free


Chart of I:DJI
DOW 17,888.35 +168.43 0.95%
S&P 500 2,102.63 +22.22 1.07%
NASDAQ 5,156.3060 +47.64 0.93%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs