Mingling your personal and business finances is not only a bookkeeping nightmare but also leaves the business owner open to IRS audit and personal liability.

The most troubling of the three scenarios is being held personally accountable for the business’ liabilities. Usually an entrepreneur will choose to create a Limited Liability Company (LLC) or Corporation (S or C) to protect themselves from being personally liable for the company’s debts, lawsuits or bankruptcy. This protection is the Corporate Veil. However, if the LLC or Corporation isn’t conducted according to specific requirements, separating personal and business expenses included, the Corporate Veil can be pierced and you can then be held personally liable. This can and will occur if the IRS or a court of law has determined that your personal and business finances are not kept a reasonable distance apart. In other words, if the IRS or a court of law determines that you are basically using the business accounts for your own personal use, the protection of the Corporate Veil is null and void. This can occur by, but not limited to, simply using one credit card for both personal and business expenses. The piercing can open up the business owner to being personally liable for anything from the business’ credit debt to tax liabilities to personal injury lawsuits.

In addition to losing the protection of the Corporate Veil, any business can be flagged for audit. One of the quickest ways to be flagged for audit is by mingling your personal and business finances and inflating eye-catching business deduction categories. Once these inflated deductions have caught the attention of the IRS, you can expect the IRS agent to review every expense receipt, every employee benefit, every gift and donation until you owe more taxes. Then, to add insult to injury, the IRS can and usually will audit the year or two prior as well as proactively flag the next year for audit. In essence, you can be in audit for 3 years.

Lastly, for this article, but definitely not the final reason to separate personal and business finances, is the inevitable bookkeeping nightmare. Hiring a financial accountant as soon as possible is very important. However, having them bill their time to separate your personal and business finances is not the best use of their skills or your resources.

Save yourself the headache, frustration, and potential personal liability by opening and maintaining completely separate business and personal accounts.

Page Name: F.A.Q.’s

a What is your privacy policy regarding my personal or business account information?

Accounting Information Management, Inc. maintains the same level of client confidentiality that is required of CPA’s by the Oregon Secretary of State Board of Accountancy as outlined below in the Oregon Administrative Rules.

Oregon Administrative Rule: 801-030-0015

Responsibilities to Clients

(1) Confidential client information. A member in public practice shall not disclose any confidential client information without the specific written consent of the client.

(a) Prohibited disclosures. Except as provided in subsection (b) of this rule:

(A) No licensee or any partner, officer, shareholder, member, manager, owner or employee of a licensee, shall voluntarily disclose information communicated to or obtained by the licensee from a client or on behalf of a client if such information relates to services that the licensee rendered for the client.

(B) Members of the Board, members of Board committees and professional practice reviewers shall not disclose confidential client information which comes to their attention in the course of investigations, disciplinary proceedings or otherwise in carrying out their responsibilities, except that the Board may furnish such information when disclosure is required as described in subsection (b) of this rule.

(b) Permitted disclosures. Nothing in subsection (a) of this rule shall prohibit the disclosure of confidential client information under the following circumstances:

(A) When disclosure is required by the standards of the public accountancy profession in reporting on the examination of financial statements;

(B) When disclosure is required by a court order;

(C) In response to subpoenas issued in state or federal agency proceedings;

(D) In investigations or proceedings under ORS 673.170 or 673.400;

(E) In ethical investigations conducted by private professional organizations in the course of peer reviews;

(F) To the insurance carrier of a licensee in connection with a claim or potential claim; or

(G) When disclosure is required by the Oregon Board of Accountancy for regulatory purposes of the Board.

aHow secure is the information we transmit electronically?

All personal and company information obtained by City Sprint resides on our company servers and is accessible only by designated City Sprint staff. Physical, electronic and managerial procedures have been employed to safeguard the security and integrity of personal/company information. All City Sprint agents and contractors with access to personal/company information obtained on the City Sprint web site are also bound to adhere to this policy.

aDo you require long term contracts?

There are no long term contracts. Engagement letters are utilized to outline services to be rendered and represent a 30 day period.

Termination of services as outlined by the Engagement Letter:

Either party may terminate this relationship on thirty (30) days written notice to the other, including email notification, provided that such notice has been received.

During the 30 day termination period projects in process shall be completed if possible, and no other work shall be undertaken unless the parties agree in writing to specific terms for the additional work.