It should go without saying that your business bank account is intended for legitimate business transactions and is not to be used as a personal expense account. That said, there is a tendency for some new, inexperienced, and even seasoned business owners to blur the lines and pay personal expenses through their business accounts. DO NOT DO THIS!
Let’s be clear … we’re not referring to using personal money or a personal credit card to purchase legitimate business expenses and then properly expensing those business expenses through the company … that is, putting through a business expense report, attaching the appropriate receipts & relevant backup, entering it into your accounting system and subsequently paying it through the company. This is generally fine and legitimate.
What we’re referring to here is paying for items like personal travel & entertainment, sporting event tickets for family & friends, treating your spouse or significant other on the company’s dime and so forth. Clearly, these are NOT legitimate business expenses; they do not qualify as legitimate business deductions and should NEVER flow through the company!
While this is YOUR company, that alone doesn’t give you unlimited authority to do whatever you want … at least not without serious implications and repercussions. Besides tax implications, among other things, you also risk piercing the corporate veil … that invisible shield that separates you the individual from you the business. Lose that protection and not only are your business assets on the line but also your personal assets. We cannot reiterate the importance of keeping the corporate veil intact and maintaining the distinction between what is personal and what is business.
If there’s any doubt about whether you can put certain expenses through for payment or reimbursement through the company, even if you may think those expenses would constitute legitimate business expenses, consult with your CPA or tax professional.