Dangers of combining company and personal funds in the same account

[BitDane]

It is a standard thing to separate a personal account and the company account.  Separating them can effectively track both the inflows and outflows of money, joining them will make it complex to identify the flow of money. So it affect the auditing of the finances.  This will also affect the funds of the company in case the person is prone to spending spree, since the funds is not separate, a person might spend the money of the company for his personal use.

Aside from that, this articles may help us understand why we need to separate our personal funds from company fund.
Why Mixing Business and Personal Finances is a Bad Idea
Why Avoid the Danger of Mixing Business & Personal Money

According to the article combining company and personal funds in the same account prevent us to:

• Improve your ability to make well-informed business decisions
• Present legitimate financial data to lenders, partners, and other interested parties
• Keep accurate books so it’s easier to prepare a business tax return

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[panganib999]

I think it's common knowledge to not mix your funds with your company's regardless if you're a board member, a treasurer, or even the founder of the whole enterprise. That counts for embezzlement right? So it's a criminal offense subject to the long-arm of the law. Would you really risk that? Besides, it's not as if this will save you from paying taxes either, one way or another you'll have to pay for them and this is especially true for founders who have separate tax profiles with their businesses.

Just stick to what's legal man especially if you're just a startup making a name for yourself. The last thing you would want right now is a hamper to your success and criminal liability will do just that if you're not careful and law-abiding.

[icalical]

Since OP write 'Company' specifically and not 'Business' then I suppose what he means is at least a Company where there are a proper work division that has enough employee to handle each division. So, I guess it's pretty common knowledge for an owner of a Company at that scale to separate the fund. I don't think a business owners who are still combining Business and Personal fund would reach a 'Company Scale' level, they will either stuck in the small scale business level or they will goes out of business, or they finally realize their mistake and start to separate the funds, after that they might scale up.

[JeffBrad12]

its common sense that usually known by most of people day 1 they started a company, its never good to just combine your personal funds with company's money because more likely when the company need money or in the brink of bankruptcy your money will also get involved which supposed to be your emergency fund now become company's emergency fund.
there's reason why people start company because they want their business to be independent from the perspective of law and finance, you create bank account specifically for the company, not for you.
therefore combining personal fund and company fund just gonna seemed silly honestly.

[Iroh]

It’s only natural to keep separate accounts for your business, no matter how small it is and your personal use. As a business owner, having your funds meant for business in the same account as your personal account is an invitation for disaster sooner or later.

At the very least, a business should keep a separate account so you’ll have clear records involving your debit and credit transactions and also precise information about how good or poorly your business is faring.
A business owner managing an account for business and personal use could likely use funds meant for business purpose for personal use.

[bitzizzix]

It's a good idea to keep them separate because a business or company bank account allows you to manage your company's finances professionally and wisely and you will also know your expenses and income related to the business or company you run. So it's best to separate personal and company or business financial accounts to avoid chaos, because this will definitely bring chaos.
Having a separate bank account will enable you to manage your business finances very well and clearly record expenses and income, no matter how small, in the company or business account that you manage.

[Don Pedro Dinero]

You really need to understand the fundamental principle of running a business if you're thinking about mixing your personal funds and company funds. The business entity is separate and distinct from the owner; that's the essence of the business entity concept. In accounting principles, it's crucial to keep them separate. When you have a business, you should only account for the transactions of the business itself. <...>

And that's it. I don't know why the OP makes life so complicated. He does what shouldn't be done and then writes walls of text about it. Don't mix your personal accounts with those of the business. Full stop. This happens in self-employed people or small businesses, because obviously in a big company with an accounting department it doesn't happen at all.

OP, you know what you have to do. Don't give it any more thought.

[CarnagexD]

It's a good idea to keep them separate because a business or company bank account allows you to manage your company's finances professionally and wisely and you will also know your expenses and income related to the business or company you run. So it's best to separate personal and company or business financial accounts to avoid chaos, because this will definitely bring chaos.
Having a separate bank account will enable you to manage your business finances very well and clearly record expenses and income, no matter how small, in the company or business account that you manage.

Right. Separating you accounts is a necessity and not something that you should just consider and then disregard.
Keeping your business finances and personal finances apart isn't just about organization, it is also about legal stuff. If your business and personal expenses mix and mingle, it can get super confusing during tax season. Also, when you register your business, it becomes a separate legal entity. Having a dedicated business account makes this separation and in case of any legal issues, your personal assets cannot easily be affected. You will also be able to monitor how your business is performing, if your accounts are mixed, youll get confused if some of those expenses relates to your buiness or just for your personal leisure.
Imagine when your business ever faces an audit, having separate accounts makes the process much smoother. It will make you life easier too.

[lovesmayfamilis]

There are also some important things that are worth mentioning. It all depends on the person who is trusted to the general means. I think we have stories when we see how an organization goes bankrupt and the owner, who received a bunch of investments after a while, starts a new business. Does anyone really think that the one who spends the organization’s money does not understand what he is doing? If, for example, the construction of any object is underway, then the amount of money that was allocated according to the quota may not be allocated for construction materials, but much less, so that the one who manages these funds can snag a good profit for himself while deceiving others. Therefore, no matter where the money is stored, a lot depends on the person and his integrity.

[DrBeer]

The issue of holding organization funds by an individual, lets say the treasurer of the organization should be heavily discouraged as most times it does not end well and leads to the funds being utilized or stolen by the person in charge. organizations should plan their startup properly and that includes being properly registered with the government which enables them to open a company account with approved banks.
However, there are slim exceptions whereby the organization are not much financially stable and funds are not readily available to go through the process of company registration and they startup their activities with the motive of doing the needful later as they grow in finance. this now leads to the organization funds being held by trusted members for the time being. Another one and the one that prompted me to start this topic gave me a really big challenge and I learnt invaluable lessons from it. It is the issue of holding association funds temporarily pending the rectification of accounts and change of signatories with past leaders whom have relocated from the state.
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To be honest, I don’t understand the problem at all? Perhaps in your country business is conducted differently, but here, the company has a current account that is assigned to a business entity. There are several keys for electronic digital signatures, for different levels of confirmation, which complicates corrupt and illegal actions with the funds of a law firm. Moreover, many companies maintain additional control over payments, as do banks with accounts of legal entities. And they can, if suspicious payments are detected, pause the transfer of funds and contact the account owner for an explanation.
The issue of “frozen” funds is resolved in the same way at the request of business owners, in situations like the one you described. But I have never heard of anyone “withdrawing money, putting it in a suitcase and taking it to a friend for safekeeping.” These are unjustified risks

Or do you mean some other situation?

[SmartGold01]

I think in terms of combining public with personal funds is very risky because as an organization or company having your account separate from personal account is much more better to know the rate at which the company or your personal business profits. Most of those who ran businesses and combining their funds together may not knows how much that is flowing in or how much lose their business is undergoing or losing, so creating an account for the business is very essential and important and is the most important thing after having a brand name or a companion name.

The best way to reduce over spending and alterations is to have the secretary and financial secretary of the company have the access to the account whereby without both of them there will be no withdrawal of funds, if the secretary goes through behind the financial secretary and their Chairman the cheque should be rejected which means for a money to be taken out of the company it requires Chairman, Secretary and Financial secretary with this they will reduce over spending of funds and properly documentary of all penny spent within the period of their office.

[stomachgrowls]

The issue of holding organization funds by an individual, lets say the treasurer of the organization should be heavily discouraged as most times it does not end well and leads to the funds being utilized or stolen by the person in charge. organizations should plan their startup properly and that includes being properly registered with the government which enables them to open a company account with approved banks.
However, there are slim exceptions whereby the organization are not much financially stable and funds are not readily available to go through the process of company registration and they startup their activities with the motive of doing the needful later as they grow in finance. this now leads to the organization funds being held by trusted members for the time being. Another one and the one that prompted me to start this topic gave me a really big challenge and I learnt invaluable lessons from it. It is the issue of holding association funds temporarily pending the rectification of accounts and change of signatories with past leaders whom have relocated from the state.
.....

To be honest, I don’t understand the problem at all? Perhaps in your country business is conducted differently, but here, the company has a current account that is assigned to a business entity. There are several keys for electronic digital signatures, for different levels of confirmation, which complicates corrupt and illegal actions with the funds of a law firm. Moreover, many companies maintain additional control over payments, as do banks with accounts of legal entities. And they can, if suspicious payments are detected, pause the transfer of funds and contact the account owner for an explanation.
The issue of “frozen” funds is resolved in the same way at the request of business owners, in situations like the one you described. But I have never heard of anyone “withdrawing money, putting it in a suitcase and taking it to a friend for safekeeping.” These are unjustified risks

Or do you mean some other situation?

Nowdays on which technology and security features then it would really be that so hard to believe that there's really that kind of breach or unauthorize withdrawal of funds if ever a business does have that kind of corporation kind of system or simply that there are a couple of individuals who do own such business.It is really just that normal that whenever that there's funds to be that outgoing then it would really be that impossible that it would really be that allowed or would be approved without others permissions and since to the easy access that we do have today then those things wont really be that so hard to be detected or totally be on point on the time that there's things happening around. This is why it would really be that some sort of mind boggling on how things to be on work specially nowadays that it is really that easy to pass up information
and also with having that common sense then business agreements and terms shouldnt really be that allowing those kind of casual withdraws or outgoing transactions without being noticed or being fully allowed.

[so98nn]

This entirely depends on how and who runs the business. For example if it is proprietary firm then whole business run by an individual in terms of finances and decision making this could imply there strongly. However there are also subtypes. For example proprietary businesses could be small or could be bigger one. If it’s second one then there is High Chance they will hire accountant and get third party auditors involved in it. This definitely brings more strict environment on the way company runs. When it’s private or public limited company then things are even stricter because they have to release accounting balance sheets every financial year. Lowest chance on making forgery there. But yeah the article seems written pretty well but things are always right based on how business is getting run.

[Fortify]

The issue of holding organization funds by an individual, lets say the treasurer of the organization should be heavily discouraged as most times it does not end well and leads to the funds being utilized or stolen by the person in charge. organizations should plan their startup properly and that includes being properly registered with the government which enables them to open a company account with approved banks.
However, there are slim exceptions whereby the organization are not much financially stable and funds are not readily available to go through the process of company registration and they startup their activities with the motive of doing the needful later as they grow in finance. this now leads to the organization funds being held by trusted members for the time being. Another one and the one that prompted me to start this topic gave me a really big challenge and I learnt invaluable lessons from it. It is the issue of holding association funds temporarily pending the rectification of accounts and change of signatories with past leaders whom have relocated from the state.

This is a very risky and complicated matter, and it is even more complicated when you combine the association funds with your own personal funds in the same account. The risk of overspending may arise as you will constantly see enough funds in your account and might tend to forget that there are foreign funds present and before you realize what you've done, you're already indebted to the company.
Secondly, there is this sense of caution that arise instinctively when your personal funds is diminishing whereby you restrict yourself to having only things you really need and curb all excesses until you are back to having much funds. In the case of combined funds, that discipline might not be observed as you see encouraging figures always.
Thirdly, You might intentionally spend the alien funds with the thought of replacing it whenever you own funds are available. This is a very big mistake without proper accounting and documentation to checkmate what you spend because before you know it, you've utilized more than your assumed funds can handle and leave yourself in a great mess.

A good solution to this is to have an entirely different account to receive funds that is not yours and refuse to have ATM card or much access to that account. In fact, the account should be as good as forgotten by you and the only connection to it is withdrawing funds for the organization purpose, Receiving credit and debit alerts to be able to monitor the activities of the account. You also need to have a place that you detail the transactions on that account, like your private record so that you can have the account record ready at any time it is requested by the organization. this rapid accounting relieves you the stress and time wastage of explaining yourself too much as everything related to the transactions on the account is properly penned down and possibly snapped and backed up in your google drive for retrieval in case you misplace the books.
This way, you will have two advantages

• Reduced Interaction with with funds that are not yours as there is a separation of concerns and you get to plan yourself properly with your funds
• You gain respect by being accountable for the funds anytime as you have the transactions carefully spelt out in your accounting books and a backup online if books are far fetched

Finally, Keep the pressure for account rectification on and ensure funds are out of your control as soon as it's done to relieve yourself from the temptations that are associated with being in custody of association funds. I advise you to update your personal records immediately there is a transaction whether debit or credit as you may forget the details sooner or later and put yourself under unnecessary stress.

Note: At the time of developing this topic, Discussing it with a friend, I learnt of a woman leader whom squandered millions under her care for the purchase of association luxurious buses and started shedding tears when asked to return the funds within one week. All these could have been avoided If the organization had its account or if she had known these principles above.

This is a very important point and a trap that many entrepreneurs can fall into when starting out. For newcomers to business it can often be a case that they will drive as much money as possible into the company, which is fine in most cases as long as they are properly documented as loans and all the right accounting is in place. However it's very easy, especially for "one man" operations to start using a company account like their own personal bank account but the separation needs to be clear, or you end up with a bigger accountant bill later on to unravel the mess. It's a hurdle that some understand in advance and that some only figure out after a bill shock or if the government tax inspectors come looking.

[GiftedMAN]

everyone is vulnerable to the temptation of taking money that doesn't belong to them, this is the reason why every association - organization - community must have its own financial account and not mix it up with the personal financial account of the chairman - treasurer or anyone who has high influence in the association. I am currently joining a church association, our association is very open with the members and every money that goes out and comes in is announced to the public so that nothing is hidden and kept transparent.

We need to free ourselves from temptation looking at how powerful it can be with so many things that can happen along. Those that have eaten company's funds blaming it on there business ideas or plans to take the company to a new level is out of embezzlement attempt. We don't even have the right to keep what does not belong to us in our account without permission from the right owners or from people that give us that privilege to handle such funds. Is so a criminal attempt if we are caught with funds that do not belong to us or we are not given the right to hold.

[BitDane]

As I stated, it is essential for the owner of the business to separate the personal funds from business funds.  It is not about the embezzlement of funds since the funds is owned by the person but rather the management and tracking of funds.

This is a common mistakes of small time business owners.  They tend to hold the funds and profit of their business together with their personal fund in one account.  This way it will be hard for the business owner to track profit and can even use his own funds to maintain his business making his financial capabilities to maintain his personal needs a bit difficult or the other way around.

[vv181]

This depends on the scale of the business and the bookkeeping process. If it is a small scale, where there is no obligation to have a business bank account, that is okay to mix the funds on one account as long the bookkeeping process for the business is rigidly in place. Still, it does not close the possibility you are overspending as thus, you making use of the business money, as you have addressed. But if one manages their own finance just right, it should not become a concerning matter to not separate business and personal accounts.

On one hand, if we are talking about a legal entity where the business is registered and has a tax obligation, then certainly, a business account is required.

[michellee]

It is not recommended to combine company and personal funds in one account. Business owners have many accounts for various purposes so that the company accounts will not mix up with other companies or other accounts. This makes it easier for them to monitor income, expenses, etc.

Having many accounts for each purpose will help company owners to be able to check their financial reports every month. And he also won't use the company account to buy his daily needs. Separating these accounts is essential so companies can record the expenses correctly. Company owners can also know which expenses are higher than others.

If this is the case, company owners can see how healthy their company is and know what needs to be improved. And if the owner wants to buy his personal items, he will not use his company funds. But he must have the discipline not to interfere with company funds.

[pinggoki]

Right. Separating you accounts is a necessity and not something that you should just consider and then disregard.
Keeping your business finances and personal finances apart isn't just about organization, it is also about legal stuff. If your business and personal expenses mix and mingle, it can get super confusing during tax season. Also, when you register your business, it becomes a separate legal entity. Having a dedicated business account makes this separation and in case of any legal issues, your personal assets cannot easily be affected. You will also be able to monitor how your business is performing, if your accounts are mixed, youll get confused if some of those expenses relates to your buiness or just for your personal leisure.
Imagine when your business ever faces an audit, having separate accounts makes the process much smoother. It will make you life easier too.

This is what I've learned from my cousin who was a businesswoman, although the words are that I should set aside money for personal stuff when I make a profit in business but given that this is almost the same thing, I just have to point it out. But I have a question though, what if you can use your business and justify your personal expenses by using the business account when you're buying something big and personal?

[gunhell16]

Such actions or strategies are not correct; I have never read or watched a business that was successful because personal funds were combined with company funds. Those two are not combined. Because when someone does that, certainly, the capital in the business will be moved, and when that is moved, the turnover in the business will gradually decrease until it becomes bankrupt.

That's why, in business, there is something called inventory and accounting jobs. That's why it's called a company, right? Those two should be separate because personal expenses are different from company expenses.