Can you use one credit card for two businesses?

Is it allowed?

Nothing stops you using one card. What matters is who the businesses are in law.

Sole proprietorships are you

A sole proprietorship does not have separate legal status from its owner, says the CRA. The US Small Business Administration says the same: a sole proprietorship does not produce a separate business entity. So if you run two sole proprietorships and pay for both on one card, you are paying your own expenses with your own card.

The books still stay apart. The CRA's instruction is direct: "Keep separate records for each business you run." Each business also gets its own Form T2125 in Canada, and in the US the IRS says "If you owned more than one business, complete a separate Schedule C for each business." One card, two sets of books.

Corporations and LLCs are someone else

A corporation is a separate legal entity. When your corporation's expense goes on your personal card, you have paid a bill for someone else, and the corporation owes you. When the corporation's card pays for your groceries, you owe it.

In Canada that running balance usually lives in a shareholder loan account. The CRA's Income Tax Folio S3-F1-C1 works an example where a company pays a shareholder's personal expenses and the amount is added to the shareholder's loan balance. The same folio says that where a corporation pays a shareholder's personal expenses with no agreement to be paid back, the value can be a benefit the shareholder includes in income. It also sets out an exception where a loan is repaid within one year after the end of the corporation's tax year. The details belong with your accountant. The point here is that the amount has to be recorded, and it has to be settled.

In the US, an LLC is taxed as a corporation, a partnership, or as part of its owner's return depending on its members and elections. A single-member LLC that has not elected to be a corporation is a disregarded entity, and its activities generally go on the owner's Schedule C. For tax, that one behaves much like a sole proprietorship. For liability it is still a separate company, and the SBA notes that business banking "offers limited personal liability protection by keeping your business funds separate from your personal funds." Owners usually record their payments of company expenses as an owner contribution or an amount due to the owner. That is standard bookkeeping practice rather than an IRS rule, so ask your accountant which your company uses.

Why separate cards are simpler, and why people share anyway

The IRS puts it plainly in Publication 583: "You should keep your business account separate from your personal checking account." A card per business means the statement is the record. Nothing to split, nothing owed between businesses.

It is not always practical. A new corporation may not qualify for its own card yet. A side business may be too small to justify one. Points, a credit limit, or one annual fee can make a single card the sensible choice. If you share, you are choosing to do the splitting yourself.

How to split one card across businesses

1. Decide at the moment of purchase. Whose expense is this: which business, or personal? It takes a second at the counter and an afternoon in April.
2. Keep the receipt. The statement shows a merchant and an amount. The receipt shows what was bought, which is what supports the claim. See what a receipt must show for the CRA.
3. Record which entity it belongs to. On the receipt, in a spreadsheet, or in an app. The record is what matters.
4. Record or settle the amount owed. If a corporation or LLC charge went on your card, record what it owes you. If a personal charge went on its card, record what you owe it. Many owners settle monthly by transfer.
5. Match to the statement every month. Every line on the statement should have a receipt and an owner. The lines without one are the ones that cost you at year end.

Worked example: one card, three sets of books

This is a made-up example. Maya owns Harbourline Design Inc, a corporation that files a T2. She also sells pottery as a sole proprietor on the side. She puts everything on one personal Visa and pays the bill from her personal account. Here is one month.

Where it lands:

$230.49 + $401.40 + $213.27 = $845.16, which matches the statement. Maya can have the corporation transfer $230.49 to her, or let the balance build and clear it later with her accountant's advice.

Now flip it. If the card were the corporation's card, the corporation paid $614.67 that was not its expense ($401.40 of pottery plus $213.27 personal), and Maya owes it that amount. That is the direction the Folio's shareholder loan and benefit rules are about, so it is the one to watch.

The client lunch also carries a second rule: meals are generally limited to 50% for tax. How that shows up differs between a sole proprietorship and a corporation, covered in running a sole proprietorship and a corporation at the same time.

What your accountant needs at year end

• One set of records per business, each with its own income and expenses.
• The receipt behind every expense, matched to the card or bank line.
• A list of charges with no receipt, so the gaps are known before filing, not during a review.
• The balance owed between you and each corporation or LLC, with the charges that make it up.
• The card and bank statements for the whole year. Keep them as long as the receipts: see how long to keep receipts.

Multiple businesses in QuickBooks or Xero

Accounting software treats each business as its own file, and each file is billed separately.

• QuickBooks Online. Intuit's help page says "Each company you create requires its own separate paid subscription." The companies can share a sign-in, and their data stays separate.
• Xero. Xero's FAQ says "You can add as many organizations as you like in your Xero account. Choose a pricing plan for each one."

So a shared card feeds several ledgers. Each charge has to be posted to the right company file, not just categorised.

How BlueAnchor handles it

BlueAnchor is an iPhone app with a web desk for people who run more than one business, or one business and their own spending, in Canada and the US. Other tools also support several businesses. This is how ours works:

• Each business, and personal, keeps its own set of books.
• Assign a card to a set of books once, and every charge on it goes there.
• For a shared card, you answer one question per receipt: which business, or personal. Once you answer for a merchant, it is learned and not asked again.
• Receipts are matched to the charge on your card or bank statement. A direct bank connection is in testing and not yet released.
• A report lists every charge with no receipt.
• It lays out T2125 lines for a sole proprietorship, T2 GIFI lines for a corporation, the GST/HST return, and US Schedule C lines.
• A bookkeeper can be given read-only access. Posting to QuickBooks Online and Xero is in testing and not yet released.

BlueAnchor does not file your taxes and does not give tax advice. The Every business plan covers every business you run for one price. See pricing.

General information, not tax advice. BlueAnchor does not file taxes and is not affiliated with or endorsed by the CRA or the IRS. For your situation, talk to your accountant.