If we receive cash back for repairs and want to charge our personal credit card instead and use the cash to open our new biz account and pay the credit over time, will we owe tax on the new account deposit? Can we even do this? We intend to build credit for the biz by opening the account.
Also we'd like to give our property to our new biz too to clear our names for new investments, is this realistic?
Thanks a multimillion
D
Cash back in the form of a seller concession is not taxable income (it is an adjustment to your cost basis). Using your personal credit card to pay for repairs is not taxable income.
Using your personal credit card for your business expenses and paying your personal credit card bill with business income is called "comingling" your business and personal funds.
Comingling brings personal liability issues into play if you are ever sued. Consult an attorney on the correct way to set up your business, to fund your business, and to contain your liability exposure in the event of a lawsuit.
I don't know what you mean by "clear our names." I assume that you are purchasing this property in your own name with mortgage financing. If so, then transferring title to a business entity does not take your name off the mortgage loan. It will still appear on your credit report. If you thought tranferring the property to your business would remove the mortgage from your personal credit report, then NO, this will not happen.
[ Edited by NewKidInTown3 on Date 02/15/2008 ]
You can comingle if you are a sole-proprietorship. You didn't state your business' entity structure. If you have a Corporation, you can just do a Corporate Reimbursement. It's a simple form you turn into your Corporation at the end of a quarter (I do it annually). Any time you (as the employee) use your personal credit card for a business expense (automatic monthly deductions for high-speed internet access, for instance, if you have a website or make money on eBay), you write the date, amount, and purpose on your reimbursement form. If a large purchase, you would also submit a receipt. It's a bit weird, because I am every Officer, so I submit a form signed by me to a Corporation for approval where I also sign it to approve it! The Annual Meeting has me feeing like I have multiple personalities (although it's basically just a fill-in-the-blank form with me signing my name at various parts). The Employee Reimbursement Form creates the separateness that stops the comingling problems should you ever be audited or have to show your books in court.
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"A deal is only as good as the quality of your Contracts." --Me
[ Edited by LeaseOptionKing on Date 02/15/2008 ]