Are You Co-Mingling Business and Personal Expenditures?

When starting a new LLC, Corporation or small business, regardless of the organization type, one of the first tasks that must take place is to open bank accounts and create operating systems that clearly separate the business operations and finances from that of the owners and managers of the business. Naturally immediately establishing bank deposit accounts (checking and savings) for the business is essential. In addition to the bank deposit accounts establishing operating loans, credit cards and other loans in the business name is important if such funding sources are to be used.
Existing small businesses and LLC's should have already taken this step. But if not, stop whatever you are doing, go to your bank and establish those accounts immediately.
It is of critical importance that business accounts/funds never be used for the personal expenses of owners, directors, managers or employees of any business. While it is true that errors can happen and a business owner inadvertently pays a personal expense with company funds, it is necessary to resolve that error immediately by the owner reimbursing the company for that expense.
Most small business owners will respond to the above by saying that they are already aware of this information so why even discuss it. The answer is that far too many business owners may know the rule but simply do not exercise the discipline to follow the rule!
All too often careless owners of small businesses and LLC's use their company checking account or credit card for all manner of personal purposes. From making payments to personal loans, personal expenses such as utilities or auto expense to shopping for groceries and even some luxury items. Those who make a habit of this, place their company at risk as well as seriously weakening the corporate veil of their company, exposing all personal assets to risk of loss. One should never allow their thinking to deteriorate to the point that they believe that they can correct a pattern of abuse through periodic reimbursements and creative accounting.
It is only through tough business discipline that you can protect your personal wealth and assets as well as the business operation and financial integrity.
In addition to vigorously protecting the company bank accounts against personal use, it is equally important to use the same vigilance in protecting all business assets from improper personal use by the owners/leaders/employees of the business. These assets include company autos, company equipment, company employees, expense accounts, etc.
Maintaining a proper and clear separation between the business and personal activities becomes increasingly difficult as additional entities are added to the business operations. It is very common, and strategically useful in many cases, for a business owner to form multiple corporations or LLC's. For example, some CPA's and Attorneys advise clients to form one entity within which they operate their business and another within which they hold all assets. If directed by competent and qualified advisors then you should structure you small business or LLC as advised. The point here is that the owners of these entities must take extra care to avoid improper movement of funds and assets between their various companies as well as between the business entities and their personal lives.