Have a job and a business, any problem if I deposit a payroll check into my business account?

Question

I work for someone part time and also run my own business. Is there a problem if I deposit a payroll check (taxes have obviously been deducted already) into my business account?

Answer 1

As most poster have said, its not illegal, but it requires a journal entry to account for it.

One method the IRS uses to audit business (or person) is to examine bank statements. The IRS makes a list of all deposits. It assumes that all deposits are taxable income unless it can be proven otherwise. If you cannot prove that this is your paycheck, the IRS will assume that it is taxable income that you failed to report.

Answer 2

I would first deposit the payroll check in my personal account and then write a check from the personal account to the business account.

This is just a way to keep your personal and business life separate.

Once you deposit the personal check into the business account, you can account for the additional capital being put into the business.

Answer 3

You didn't say whether your business was conducted through a separate entity such as an LLC or a Corporation.

If you take personal funds and deposit them directly into your business checking account, you aren't necessarily doing anything wrong. Basically you'd call it a capital contribution and be done with it. But if you were in the habit of regularly depositing your personal paycheck into the business, it could bring up questions about whether or not your LLC/Corporation really is a separate legal entity. Creditors or specifically their lawyers could contend that the entity was not in fact separate from you. Therefore if they need to go after your assets to satisfy a debt, you wont be able to hide behind the corporate veil to protect your personal assets.

My suggestion would be only to do it if you really, really, need to do it. And document why you did it so you can show that you really were intending for your business and personal affairs to be separate.

Answer 4

I don't know UK law, but from a US perspective, here's how it would play out. I'm sure that there is also a clause in your contract specifying WHEN you will be paid. The when and the method are in conflict (not through your fault, but some organizations have much slower payment processing, so they may not have set up the direct deposit yet.) When those things are in conflict, the when is almost always going to win out over the method of payment. So, you could sue (in the US) for breach of contract, but what would you win? Unless the contract has a specific breach penalty, all you win is a pat on the back saying 'you're right' ... and if then the contract would be voided and you'd be out of a job. Work with the company. Follow up every pay period. Eventually they'll work it out.

Answer 5

It's not illegal, but it could cause you problems. If you get selected for audit by the IRS, they can look at all deposits into all your bank accounts. It will make life much simpler if you are not mixing your personal funds with your business funds. If had to infuse some cash into my business, I'd deposit the payroll check into my personal account, then document the check I write from that to the business account.

Answer 6

I'll just agree that it is basically just an accounting issue.
You can do it, but make sure you account for it properly, which is probably more work than just depositing the check in your personnal account and writing a check from poersonnal account to business account.

Answer 7

It muddies the waters a bit and could look like business income if your tax return was audited. Generally you should deposit business receipts to the business account and personal receipts to your personal account.

Answer 8

Not really, although it will make the accounting trickier - you don't want to end up showing that as business income and paying tax on it again.

Answer 9

yeah because when you get robbed you have nothing to fall back on. go to Dave Ramsey classes