How mixing personal and business could cost you

We’ve all heard the warnings:

“Keep business and personal separate.”

“Don’t mix business and personal.

Sometimes, these phrases can refer to the concept of keeping personal life and work (or business) life separate. In the context of finances, it refers comingling, which occurs when personal and corporate funds are treated as one. A business owner using their personal bank account or credit card for business purposes (or vice versa) is comingling business and personal funds.

When a business is incorporated, it receives certain liability protections. By comingling business and personal funds, the business owner risks “piercing the corporate veil” and losing its limited liability protection. The absence of this liability protection means that the business owner could be held personally liable for damages during legal disputes.

Aside from incorporating, setting up and actually using personal and business accounts for their intended purposes is one of the most important things that a business owner can do to help protect their personal assets.