I've been trying to manage two separate bank accounts and two separate Quick Books files, but am having extreme cash flow difficulty for various reasons. Sometimes, I just need to grocery shop for my family, and there is no money in the personal account. Is it okay to buy groceries from the business account, and if so, what do I need to document?
Regardless of the answer to that question, is there any reason to maintain two quickbooks files?
As a sole proprietor, you've got no corporate shield to protect you from liability, so for all intents and purposes, your personal assets and debits are also your business assets and debits, and you're the business's only employee so all the profits are yours anyway and you can take them when you like without documenting loans and repayments.
But when filing taxes for your own business and filling out a Schedule C, you'll need good documentation so you can make sure to get all the available deductions, so yes, there's still good reason to maintain separate and accurate accounting records.
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As the prior attorney stated, you do need to keep good records for tax purposes. The best practice is to keep 2 separate bank accounts, 1 for the business and 1 personal. You only need quick books for the business account. When it is time to pay personal bills, you would write a check from the business account to your name, and deposit it in the personal account. That way at the end of the year all the checks drawn on the business account, other than to you, were for a business purpose and would be deductible. If you write checks for groceries from the business account, you can't deduct those as a business expense, and it will take your accountant longer to reconcile your books, and if you are ever audited, it may make the auditor suspicious of other checks.
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