Carole Fox on thu 31 jan 02
While on the subject of credit cards....
My friend (who is also a potter) and I were talking about the =
possibility of sharing a credit card set-up to cut down on the costs. We =
were wondering about how we could set up such an arrangement without =
having to form an entity of some sort to oversee the operations. We =
don't mind the work, but we do not want the bank account for the =
card-taking to be viewed as a separate business.
Or is there just no way getting around it?
- Carole
Carole Fox
Silver Fox Pottery
Elkton, MD
cfox@dca.net
L. P. Skeen on thu 31 jan 02
Carole,
If you trust your friend and he/she trusts you, why not just set up a joint
account (the bank does not care what your relationship is...) and both of
you use that account to do your cc business. You'll have to split the setup
and discount fees of course...not hard. Then you just transfer your part of
the $ into your own account.
L
----- Original Message -----
From: "Carole Fox"
To:
Sent: Thursday, January 31, 2002 8:46 AM
Subject: credit cards/ sharing
While on the subject of credit cards....
My friend (who is also a potter) and I were talking about the possibility of
sharing a credit card set-up to cut down on the costs. We were wondering
about how we could set up such an arrangement without having to form an
entity of some sort to oversee the operations. We don't mind the work, but
we do not want the bank account for the card-taking to be viewed as a
separate business.
Or is there just no way getting around it?
- Carole
Carole Fox
Silver Fox Pottery
Elkton, MD
cfox@dca.net
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Olivia T Cavy on fri 1 feb 02
Carole,
I'm thinking about your proposal from the perspective of the various tax
agencies and the company issuing you the credit card set-up (which I'll
call your bank for discussion purposes).
From the viewpoint of your bank, they want to be sure someone/some
company is financially responsible. My understanding is that they
generally won't grant a set-up unless you have a legitimate business
(preferably one with a store front), so one of you will have to be the
nominal owner of the credit card set-up. In other words, you are unlikely
to be able to truly share the credit card set-up unless you are co-owners
of the business. If you're that owner, you're the one taking all the
credit risks.
From the viewpoint of the IRS and your state taxing authority/department
of revenue, they want to be sure that you are reporting and paying tax on
all business revenue, as appropriate. If your state has a sales tax, they
also want to be sure that you are collecting and remitting sales tax, as
appropriate. As such, they have the power to audit your business records.
In any audit, you want to be able to show that you included ALL income
registered to your business on your tax forms. In an audit, you are asked
to provide all your bank account and brokerage account statements for the
period under audit. All deposits are added up and matched to the numbers
on your tax forms. If you reported less than the total from the
statements, you are asked to explain the discrepancy.
I would not want to be the one sitting across the table from an auditor
saying that not all the deposits into my bank account were mine. Half of
them were XYZ business because we shared the credit card account. I would
much rather have all the deposits match my tax forms!
I'm not saying that this explanation would not be accepted, just that I
wouldn't want to have to explain this. If you decide to go ahead with
this arrangement, I'd certainly want annual documentation in my files,
signed by your friend, giving her business ID, sales tax number, name,
etc.
If you do go ahead with this arrangement, I would be sure to pay my
friend by check or bank transfer, where it is documented, and show this
on my tax returns, all of them. If the amount is significant to your
business sales, this will make your return look funny. My first thought
would be to put the amount you paid your friend for her sales on line 2,
returns and allowances. But I'm not speaking from personal experience,
just thinking out loud.
If your business is located in a jurisdiction with a gross receipts tax
of any sort, this potentially creates additional tax liability for you,
not a good thing since the sales weren't really yours.
I would also figure out how much money you are really saving by sharing
the account. It might not be worth it for the hassles of record keeping
and transferring money.
It may be my CPA training, or just my paranoid personality , but if
you decide to go ahead and get the credit card set-up and share it with
your friend, I would think you'd want a very definite agreement as to
responsibilities for as many financial contingencies as you can think of.
Who will be responsible for return sales? Who will reply to any credit
card inquiries? How much time will it take for you to transfer money from
your bank account to the other person's account-- will you have to do
this immediately, every time money gets into your account that isn't
yours? Who will pay fees? There may well be other potential issues out
there as well.
Lastly, be sure that you get the other business' sales tax exemption
number, because in essence your business is wholesaling at no profit.
I do not have direct first-hand experience with a situation like this, so
this is my "theoretical" answer.
Bonnie
Bonnie D. Hellman, Pittsburgh, PA
PA work email: oliviatcavy@juno.com
PA home email: mou10man@sgi.net (that's the number 10 in the middle of
the letters)
On Thu, 31 Jan 2002 08:46:35 -0500 Carole Fox writes:
> While on the subject of credit cards....
>
> My friend (who is also a potter) and I were talking about the
> possibility of sharing a credit card set-up to cut down on the
> costs. We were wondering about how we could set up such an
> arrangement without having to form an entity of some sort to oversee
> the operations. We don't mind the work, but we do not want the bank
> account for the card-taking to be viewed as a separate business.
>
> Or is there just no way getting around it?
> - Carole
>
>
> Carole Fox
> Silver Fox Pottery
> Elkton, MD
> cfox@dca.net
>
>
_________________________________________________________________________
_____
> Send postings to clayart@lsv.ceramics.org
>
> You may look at the archives for the list or change your
> subscription
> settings from http://www.ceramics.org/clayart/
>
> Moderator of the list is Mel Jacobson who may be reached at
> melpots@pclink.com.
________________________________________________________________
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