If you started a company, it probably seems to you that you had to become both an accountant and a lawyer overnight. New obligations can seem quite intimidating, especially if your activity has no points of contact with accounting and law and if you are now encountering these topics for the first time. For many, the whole process seems like a real tangle, so they postpone opening a company until they educate themselves at least about the basic terms and obligations. It is clear that no one wants to unknowingly break the law and “suffer” due to naive mistakes.
Even after a number of years of successful business, some questions regarding finances and bookkeeping still remain unclear to entrepreneurs and employees. When the tax inspectorate knocks on the door, all the income and expenses start running through our minds, and then we wonder if we were actually allowed to pay for that business lunch with a business card. So that there are no more doubts, we will deal with this very question below.
What can be paid with a business card?
According to the rule, only business expenses should be paid with company funds, that is, with a business card. This would mean that in this way only expenses incurred in order to perform business activities are covered. Therefore, the epilogue of such expenses should include generating income in business or saving money. Then we talk about business expenditure.
From the above, it becomes clear that the acquisition of certain goods or products for the purpose of further placement, performance of works or provision of services will constitute a business expense. Renovation of business premises, including procurement of necessary materials and employment of labor, can also be subsumed under business expense. Office supplies can also be paid with a business card, as well as the services of various online services (such as business email, document storage and various applications). Tickets for transportation during a business trip, as well as fuel for a company car, are business expenses. And, finally, lunch with business partners and associates can also be a business expense. So, there is no reason to worry – paying for a business lunch with a business card is completely legal.
What can’t be paid with a business card?
Everything related to personal needs cannot be considered a business expense. Even if you are a business owner, you must not use money from your business account to cover personal needs. For example, the renovation of business premises with company funds is legal. However, if you withdraw money from the company’s account to renovate your own apartment, you are breaking the law. Vacations with the family, various family celebrations, fuel for a personal car – are considered personal expenses and must not be covered by company funds.
Personal expenses of company founders, directors, and employees may not be covered from these funds. Many are mistaken because they think that everything depends on the payment method. For example, if the child’s birthday celebration is paid for with the company’s funds, it is irrelevant whether the payment is made through a current account, business card or cash. In all three cases, company funds were used to cover personal expenses and the procedure is illegal, and the consequences depend on the legal form in which the company operates.
Are the rules different for entrepreneurs and companies?
When it comes to entrepreneurs, the rules are not so strict. An entrepreneur is a natural person registered to perform a specific activity. Therefore, he is responsible for all business obligations with his personal property. In this regard, the entry of personal property in business books and the payment of business funds for personal needs can pass, subject to compliance with certain rules and regulations. It is important that the payment of personal expenses is never booked as a business expense. In this way, personal expenses do not affect the tax base on net income.
The Law on Business Companies is quite inflexible in this matter. The founder must not use the company’s funds as if they were his own. Otherwise, a misdemeanor is committed, i.e. breaking the legal form of a business company. However, if the founder is employed by his company, this consumption may be taxed as earnings. In that case, you should take into account the amount of tax on such an expense.
So that the demands of the tax inspection do not leave you speechless, you should take care of how you cover business and personal expenses in time. It may happen that you view a certain expense as business, but it is not such an expense in the eyes of the law. That’s why you should always have a trusted accountant with you. Accounting agency is here to flawlessly monitor the financial side of your company’s operations, to inform you in time about all possible changes and amendments to the law, and to answer all your questions, including: can I pay for an official lunch with a business card.
Source: www.economy.rs
