Serious business question. (Accounting/Business types please read.)

Hey, folks...

I'm sure somebody here knows the answer to this.

I just incorporated White Rose as an S-Corp in which I am the sole stockholder.

Is there a problem with using my personal checking account to get things going if I keep careful track of all transactions? The business accounts I have looked at have a minimum initial deposit of $500, and I'm here to tell you, White Rose doesn't HAVE $500.

Also, if there is anything else you think I need to know getting this off the ground, please feel free!

Your company account seperate from your personal account.

1. Apply for a federal tax id
2. separate checking account
3. State Business license (check with your state)
4. County/City license
5. You have to incorporate in a state so you might have state forms and expenses

I am an s-corp - I do all these things...

The only time we ever use our personal account is if/when we make a loan to the corporation, and when we do that, we also execute the proper promissory note, etc. .

illegal to use your personal checking account for a corporation, although I haven't kept up with this for ten years. The secretary of state should be able to inform you on this and it doesn't cost anything. Also, you can't take draws for personal use, but must pay yourself a salary as an employee with payroll taxes taken out. The minimum deposit rule usually varies according to the bank. I would shop around for a bank that doesn't have that rule or other kind of institution that provides that type of service.

I have an S Corp and if you ever get audited and therefore never have to show receipts, It's probably nothing to worry about. If you ever did get audited, what the IRS mainly wants to know with an S Corp is that you are "paying" yourself enough money in salary versus the distribution portion on the total monies you personally get. The salary (they call it Compensation) part is taxed like income so you MUST pay social security/medicare tax on that portion from dollar one. Then there's the Distribution part. The attractive thing about an s corp is that a portion of the money you give yourself to live on is taxed like capital gains--much less tax! In the past people with s corps have paid themselves all in distribution money to avoid paying any part of social security. But the feds sent out a form letter last year that warned they'd be looking closer at that and we'd all better be paying a "reasonable" part of our money in income--ss taxable. They figured out they are being ripped off by s corps, I guess.

All that said, I would think obtaining a company checking account is a minimal worry, although the fact that you are concerned shows you want to do everything right--which is good when you are running a business. I do believe that in any potential audit they would totally let you slide on this, as long as you showed you did get a business checking account as soon as you could afford it. Yes, keeping your corporation's money and your personal money separate is good. Your explanation would be-- I think-- satisfactory in any audit. As to whether or not you are breaking any laws by not having one, I don't know and I'm sure you will find out. Again, for a business with so little capital, it seems like a forgivable transgression in any case. I am quite sure that if you pay your venders with personal checks at least for awhile, they will not refuse them!

Have you asked a local credit union about business accounts? I have on my list of things to do for 2005 switching from my "piggy" bank to a credit union because they are more community oriented and often give better deals.

edit: the first sentence is EVER have to show receipts!

is legally a separate person.

Therefore, if you write a check for an S-corp expense, you must clearly delinate whether it was a loan, purchase of stock, or purchase of product from the s-corp. Therefore not having a checking account in a corp name will make life much more difficult.

Its not so much a tax issue, but rather a liability one. If you regularly comingle funds without a clear paper trail (or even with one), you run a good chance of having the corporate viel pierced, thus defeating the entire point of incorporating.

The rule is to keep all the tax crap straight, and best to have a
certified accountant who will go to tax court "for" you if that
ever comes up. As well, your accountant will advise you on the
proper way to book financial details.

Probably you should pay the funds in to the corporation account which
will take about a month to open (incompetent american banks!).

It might seem like getting an accountant is needless overhead, but
later you'll see it as a blessing... as well, find an attourney and
get them on board with the company as well.

Make sure you keep the finances strictly separate from your personal
stuff... at the worst case, on start up, pay some personal funds in,
but never the other way, unless you file an expense report, and
claim reimbursement on paper so the accountant can see the paper trail.
(obviously salary, but you'll need to get your payroll stuff worked out
and always pay the TT&L, right at the point when you draw salary).

A good way to handle things as well, is to take one of your personal
credit cards, and use it for your business ONLY. Then file all the
statements with the business records and this is a simple way of
getting your business credit, and making payments simpler. You then
know that the business always pays that card, and its statements always
go in the business records.

Good fortune with White Rose Inc.