Using a credit card for your lawn care business expenses.

As a new business owner, it is a great thing to pay for everything you need as you go and not go into debt. Taking on debt at any stage is dangerous but it is especially risky when you are a new start up. More new businesses fail due to a lack of positive cash flow than any other reason. When you take on debt, the debt needs to be paid back and that money comes out of your cash flow. If you keep yourself debt free, you don’t weigh yourself down with monthly debt payments. With all that said, what is the best method to follow when looking into using a credit card for your lawn care business? That is the question asked on the Gopher Lawn Care Business Forum.

One lawn care business owner wrote “I was told by my bookkeeper I need to get myself a credit card for business purpose only since I’m not suppose to use my personal credit card for business purposes.

So I applied for and was approved for a credit card with a 15 month 0% interest offer. I picked it up for the purchase of a new push mower and other business related items including advertising.

I made this decision based on the idea that the business credit card would only be used for business items, even though it is not in my business name. I did this to make it easy to keep things separated. 0% interest is the only way I’m going to be able to buy these items. If I did try to get a credit card in my business name it appears I would be paying a high interest rate on it and to me a card that’s in my business name just doesn’t seem to be worth that right now.

Credit cards and the lawn care business.

Credit cards and the lawn care business.

For tax purposes I do wonder if I can use my personal credit card to purchase business related items? Will that cause any tax/deduction issues? I’ve not dealt with the ‘tax’ stuff yet, and I was ready to buy the mower tomorrow, so if anyone can clarify, I’d be grateful!

The other thing I am kind of at a loss with is the difference between a company and a business. Is there a legal difference? I thought there was but many people seem to use the two words interchangeably, which can cause confusion. I am not a company. I’m not an LLC, C corp, or S Corp. I’m a sole proprietorship. Does that help my credit card situation?”

A second lawn care business owner said “if you are a sole proprietor you can use your personal credit card to make purchases, but use a very good accounting method to keep track of all business expenses for tax time. The benefits of LLC, or Incorporation, in general, is that if someone sues they can only go after your business and not your personal assets. The down side to being incorporated or being an LLC is that the business generated revenue can not be used for personal purchases. If you go this route you will have to decide what the business will pay you each week.

Yes the term ‘company’ is technically used to refer to incorporated endeavors while ‘business’ is meant to refer to a sole proprietorship.

If you are incorporated and you use a credit card that is in your name, it is not so much the tax implications you should be worried about, as it is the piercing of the corporate veil.

In other words if you use a personal card for business, then you and the business are not separate entities and if there happened to be an accident where there was a large award, they could come after your personal assets like your home, cars, furniture etc. It also does not matter if the accident happens 15 years from now.

If you have an LLC, C corp, or S Corp, you must keep all finances separate to protect yourself from this possibility.

To sum it up, if you are a sole proprietor, you can use your personal credit card for purchases although it is easier for you to use one that is dedicated to only business expenses. Doing so will help you when tax time comes and you are trying to figure out which expenses were personal and which were business related.

If you are incorporated, get a credit card with the company name on it so you keep yourself and your company financially separated.”

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