Entrepreneurship & Small Business

Spending from your business account

  • Last Updated:
  • Nov 2nd, 2018 3:39 pm
[OP]
Newbie
Oct 31, 2018
4 posts

Spending from your business account

We have a corporation and a business bank account along with it. We don’t pay ourselves salary and we don’t issue dividends. Our accountant said for us to have all of our bills come out of the business account, spend out of the business account, and at our fiscal year end just send him invoices/statements and the receipts that were used for work.

Is this allowed? Is it frowned upon by the cra? Can someone please explain the upsides/downsides of this
11 replies
Sr. Member
Nov 13, 2006
776 posts
405 upvotes
You honestly need a new accountant. Your accountant should have given you the options on how to use the business bank account to fund personal expenses (pros and cons of each).

However, honestly DO NOT mix personal with business, do yourself a huge favor and open a personal bank account and spend the money in that account for all your personal expenses. Just transfer lump sum payments through out the year from your business account to the personal account.
Member
Nov 12, 2014
446 posts
247 upvotes
Kingston, ON
saydee636622486819711871 wrote:
Nov 1st, 2018 1:48 pm
Is there a penalty for spending out of the business account like this?
Yikes. Any money you take from the business to use personally is either salary, dividend or a shareholder loan. If a SH loan you need to repay this in 2 years or it becomes automatic income to you (and no deduction to your corp). Get a new accountant.
Sr. Member
Nov 13, 2006
776 posts
405 upvotes
saydee636622486819711871 wrote:
Nov 1st, 2018 2:35 pm
Doesnhaving cheque’s deposited count as paying back a SH loan?
Everyone is saying to get a new accountant, please do so. If this accountant can't help you with a small issue like this I can imagine more complex issues. I would not trust him or her to do your T2 return.
Member
Nov 12, 2014
446 posts
247 upvotes
Kingston, ON
saydee636622486819711871 wrote:
Nov 1st, 2018 2:35 pm
Doesnhaving cheque’s deposited count as paying back a SH loan?
You have to repay what you take, and it can't be a series of loans/repayments....i.e. you can't borrow $10k, repay it by the 2 years and then take out that $10k again.

If you don't repay it then the accountant should declare a dividend to you for that amount to minimize the damange. CRA frowns upon mixing business and personal assets....don't do it.
[OP]
Newbie
Oct 31, 2018
4 posts
I just called CRA and spoke with an agent and he said it’s not advised to do mix the two but that he would patch me through to a senior agent to explain any repercussions . The senior agent then explained that even though it’s frowned upon there is no repercussions and you can go about how you please, spending personal money and personal bills from the business account. As long as you’re claiming the proper things in the proper way. People do this as a tax breaks what he said. He also said my accountant is in no way giving me bad advice or negative direction. It’s just a different option and it’s up to you to do it or not.
Deal Addict
User avatar
Dec 12, 2006
1032 posts
59 upvotes
Calgary
There's no solid tax repercussions but it becomes an absolute nightmare when it comes to bookkeeping as it's difficult to differentiate between business and personal expenditures. As people mentioned above, it's best to transfer lump sums to your personal bank account to pay for personal expenditures.
Deal Addict
Feb 5, 2009
2610 posts
736 upvotes
Newmarket
Most likely OP is not understanding what the accountant told him, or OP is missing important parts of the information. I don't actually understand what OP is saying in his original post, is he asking about taking out money personally, business expenses or what? Either way there is nothing illegal about paying for personal expenses from business account, we don't have a whole picture of the situation, and I am not sure why some of you are saying to get a new accountant, based on what?
How do any of you answering the questions know that there is no huge shareholder credit, or that the accountant said he will address the dividends or s/h loan at year end?

I fully agree that mixing personal and business expenses can create a nightmare, but in this case the accountant apparently said to have all of our bills come out of the business account, spend out of the business account, and at our fiscal year end just send him invoices/statements and the receipts that were used for work. Does the accountant say to pay the personal bills out of business account? He does say to submit all invoices that were used for work, I am assuming work means business not personal expenses.

I think there is more misunderstanding here than the accountant not knowing what to do.
Deal Guru
Aug 2, 2010
12687 posts
3110 upvotes
Here 'n There
You can take money out of a biz acct for personal use. There is no law against it, no issue at all and it's absolutely totally drama-free. Frowned upon by CRA? They have no clue (which I have found often the case). All you need to do is record it as a personal draw so you can categorize it as salary, dividends or shareholder loan, which you don't have to even decide at the time of withdrawal. I've been doing it forever. It's an accounting issue, not a tax or law issue. It's not a nightmare but insanely easy peasy to keep track of like any other payment. It's no different than submitting a petty cash statement to your co that you then get reimbursed for.
Deal Addict
User avatar
Feb 14, 2009
1040 posts
371 upvotes
...oh...today Friday.... people are excited for weekends and have
good energy to fight over nothing. There is very simple exercise to
avoid any negativity: add "For me" in the beginning of any statement.
For example:

For me -- mixing business and personal expenses in one physical account is bad.
For me -- categorize tons of mix-personal-business expenses is hard.
For me -- this issue is nothing, I pay accounting/bookkeeper 10K per year and
he does his job.

TGIF!

Cheers!

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