Do I Need a Company Credit Card?

You have your company up and running.  The concept is working and you actually have revenue coming in to pay some of the bills that have been piling up.  You followed your attorney’s advice and have created an S Corporation to protect yourself from personal liability.  You’ve already filed your first corporate tax return.  The “bottom line” wasn’t great, but that’s ok since you’re just getting started.  The business is going to survive!

Now that you are through the start up stage you want to get further organized.  You’re also starting to travel some for business, taking a few clients out for lunch, and need to order some office supplies through the Internet.  No problem – just put it on a credit card.  Here’s the question: do you need a corporate credit card to charge these items and deduct them for tax purposes or can you use a personal credit card?

There is no requirement that a corporation (or an LLC for that matter) needs to have a credit card issued in its name in order for business expenses to be deductible for tax purposes.  Using a personal credit card is fine and is, in fact, usually easier to obtain given that you have most likely already established a personal credit history that is much more extensive than your newly formed corporation.

That being said, here are a couple of quick “rules” that you should consider following:

  • Pick one of your personal credit cards and use it ONLY for business.
  • If you have more than one business, use a separate card for each business.
  • DO NOT charge personal or non-business items on this card.
  • Make sure it has enough of a credit limit to allow you to charge the needed items.
  • Keep the monthly statement as that is your detailed record of the expenses incurred for tax purposes.
  • You DO NOT need to keep the signed receipts as long as you can document the business purpose for the charges incurred (including names of people taken to lunch or other entertainment).
  • Make sure the credit card bill is paid from the company checking account.
  • Have your accountant analyze the monthly statement and categorize the charges into various expense categories.

Starting and running a business is hard work, especially when you are in a growth stage.  Once the business has been established and running for a number of years you can apply for and obtain a company credit card.  In the interim, save yourself some time and effort and utilize a personal credit card.

Russ Wertz – Founder and CEO of Wertz & Company, LLP, a Professional Services Firm located in Orange County, CA that specializes in working with entrepreneurs along their journey to success.