Your Business Bank Account Is Not Your Personal Coffer
As a business owner, it’s vital to stay away from using monies from your business to pay for personal expenses even if you intend to reimburse the company later. You run the risk of piercing the corporate veil and getting into serious trouble with the IRS and other tax agencies should you and/or your business undergo an audit (ex: claiming business deductions for non-legitimate business expenses, failure to report and pay taxes on taxable income).
Depending on how your business entity is setup (ex: Limited Liability Company: single-member LLC, Partnership, LLC taxed as sub-chapter S or Corporation: C-Corp, sub-chapter S), owners may receive payments from the business in the form of draws (owner’s draw), guaranteed payments, salary, equity distributions, dividends and so forth.
Outside of these legitimate sources of income and receiving reimbursement for legitimate business expenses (you should have detailed expense reports with the appropriate business receipts), you should not use monies from your business to cover any personal expenses. This includes paying for personal travel, personal trips & vacations, personal entertainment (ex: tickets to shows or events), major purchases or down payments on major purchases for personal use (ex: cars, homes, equipment) and so forth. It should go without saying that this applies to all owners of the business and its employees.
Keep in mind that providing an “allowance” to owners under a written agreement does not make it acceptable to ignore applicable business/tax laws and best practices. Allowances should either cover legitimate business expenses under an accountable plan which should require detailed business expense reports and receipts or if under a non-accountable plan, allowances should be treated and reported as taxable income to the recipient. Be sure to consult with your general counsel and/or your CPA to ensure the business is following best practices and is compliant with all applicable business/tax laws and reporting requirements.