There are many small business owners who do not keep their business assets separate from their personal assets. This is a bad idea, both legally and logistically. It is a very important to keep the limited liability shield between the business owner and the business. When you commingle your business and personal funds, creditors can “pierce the corporate shield” and get to your personal assets through your business liability. This is one of the main reasons to avoid commingling your funds.  The other is tax related.


When you commingle your funds, you are treating your business funds as your personal money, whether buying or selling. Some of the most common ways to commingle are:

  • Having only one bank account for personal and business needs.
  • Depositing business checks into your personal bank account.
  • Transferring money between business and personal accounts without documentation.
  • Writing business cheques for personal reasons/expenses, and vice versa.
  • Using a personal credit card for business purchases, and vice versa
  • Withdrawing money from your business account to pay personal expenses without documentation, and vice versa.


It is very important to keep your “corporate shield” intact. As discussed above, when you commingle, your corporate shield is lowered.  Essentially, all the work that you did when forming the business entity including drafting By-Laws, developing Business Plans and paying registration fees will be all for nothing as far as limiting liability between the business and yourself. Creditors can reach your personal assets if you commingle, and therein lies the main problem with commingling.


The impulse to put your business cheques into your personal account is understandable for a small business owner. The first thing you should do is create a separate bank account if you have not already done so and document all expenses, withdrawals, and deposits.  Documenting allows you to become a better bookkeeper for your business, and/or keep better records for taxes. Having a better accounting system by keeping separate bank accounts and only using business funds for business expenses can help you see how your business is performing, and seeing where you need improvement.


It also allows you to keep to your personal budget as you will not be seeing business funds in your bank account.  Sometimes you may need to access business funds due to a personal emergency.  The easiest way to do so is to issue a “business loan” to be repaid in a definite period. Of course the opposite is expected if you need to inject personal funds into the business.

One last benefit that is probably the most important is the reduction in your tax liability.  You cannot deduct business expenses that you cannot document. When you have one account for both personal and business expenses, it is hard to identify what you need to deduct and for what purpose. Accountants are lovers of documentation, and by keeping track of your business income and expenses in its own business account is crucial to help them maximise your deductions and minimise your tax liability.


Many, if not most, small business owners pay more taxes than they are required to because they do not have an organised system of keeping records and recording expenses. By simply creating a separate business account, and avoiding commingling funds by using business money for personal expenses, you can create a more organised and efficient way to reduce liability and taxes.


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