As small business owners who are usually wearing many hats we tend to do thing that overlap with our personal life: Go grocery shopping in the middle of the day after a business meeting, work while away on vacation with our family and make purchases with our company credit card for personal expenses.
WHAT WAS THAT LAST ACTIVITY????
We have all been there: We are at the register getting ready to make a personal purchase and decide that it doesn't matter which card we use because it's our business. I recently read a post on a forum that says as much:
Paying personal purchases on company credit card.
[I’m the sole owner of an s-corp and have an owner’s equity account. This months cc bill has both personal and business purchases. I would like to pay off the credit card balance using $ from the company checking account.
For example : I owe $150 on the cc, $25 for personal purchases and $125 for business purchases. What is the best way of dealing with this in QB. Do I draw the $25 out of the owners equity account?]
This is disaster on a stick! Much like what the commenter below states:
[If this is a corporate credit card, this is called "commingling" and is mixing personal and business. Further explained, you are using the Corporate's finances for personal.
The rules for what type of activity is allowed for the movement of funds between the corporation and shareholders are very narrow. The whole point of having a corporation is the protection of Self from Business. Your personal assets and the corporation's assets and risks should be seperate. Once you commingle, there is no longer that separation. This is called "piercing the corporate veil."
If you do not honor this separation, why would an attorney or collection agency honor it ?]
I know life get's busy crazy but not paying attention to this small detail could cost you big time. I will be sharing some tools that you can use in the next few weeks that will make keeping track of this mundane tasks not such a pain.
Are you guilty of this? Share in the comments below.
KEEP IT SUNNY!