I strongly advocate
for strictly separating personal from business expenses and for
keeping your accounting books orderly and tightly organized. It will
make your life easier, your accountant's life, and the taxman's mood
in case you would get an audit.
Your accountant will not
appreciate you throwing in a shoe-box filled with receipts, for him
to sort out. Do it yourself, especially when your accountant is on an
hourly rate. The trick to tight books is to archive receipts and
invoices as soon as possible. Don't let them fly around until it's
unmanageable.
The main reason to keep private and business
expenses separate is that both are taxed in a different system.
Personal income and salary are taxed under the regime of personal
income tax (PIT). In contrast, business profit is taxed under the
regime of corporate income tax (CIT).
When you introduce private
expenses into your business books, those will most likely (*) be
considered salary, and consequently thrown out of the business books,
to be taxed under PIT. Spare yourself the trouble.
An example.
You own a restaurant, and your hobby is playing golf. You
purchase a new set of golf clubs with your company's credit card.
Your accountant and the government will not accept these golf clubs
as business expenses.
(*) Note: depending on your countries'
tax system and legislation. In most jurisdictions, the PIT is higher
than CIT.
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Top 10 about the author; Erik Victor
1. is a serial
entrepreneur and started his career in Engineering
2. currently a
majority shareholder in corporations in the fields of Industrial Real
Estate, Wealth Management & Investment funds, and International
Tax Planning
3. has a passion for the dynamics of young
businesses and actively endorses several start-ups
4. is an
engaged member of several think-tanks and an international conference
speaker
5. has a business footprint in six countries
6. speaks
five languages
7. personal life - resides in Europe
8. Erik
(48) is known as a discrete and private person, a family man
9.
loves to spend his limited holidays in the mountains or at sea on his
yacht
10. Erik has no social media accounts
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