Creative services · 🇺🇸 United States
Personal and business spending in one account for four years
A photographer incorporating for tax reasons discovered the entity change was the easy part.
US photographer, sole proprietor moving to S-corp. Client identity withheld — we publish names only with written permission, so this engagement is described by its shape rather than by who it was.
4 years
Of mixed transactions separated
S-corp
Election supported
Reasonable
Salary basis documented
The situation
- The photographer had operated as a sole proprietor with one bank account for everything.
- An accountant had recommended an S-corp election for the tax saving, which required a real set of books.
What we found
- Business and personal transactions fully commingled, with equipment purchases indistinguishable from personal spending.
- Home office and vehicle use claimed with no supporting record.
- No basis for setting the reasonable salary an S-corp election requires.
What we did
- Separated four years of transactions and established a clean business-only account going forward.
- Built a defensible record for home office and vehicle use.
- Established a reasonable salary basis with documented comparables.
The outcome
- The S-corp election was supported by books that could withstand questions, and the tax saving was real rather than theoretical.
- Separating accounts prevented the problem recurring, which was worth more than the historic cleanup.
What we'd flag
Some historic deductions could not be substantiated and were not claimed. The cleanup reduced the prior-year position slightly.
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