Risks of Mixing Personal and Business Money in a Hong Kong Company

Why it is a problem

• Records: the law requires records that explain the company's transactions and show its financial position accurately (s.373). Unexplained personal items undermine that.
• Director loans: company money used for a director's personal benefit appears as a debit on the director's account, which may be a loan needing member approval under section 500, and must be disclosed in the notes (s.383).
• Audit and tax: the auditor will query personal items, and the IRD expects records that let assessable profits be worked out. Mixed transactions make it harder to prove which costs belong to the business.
• Evidence of separateness: keeping the company's affairs distinct supports the principle that it is a separate legal person.

What to do

1. Open a bank account (and cards) in the company's name for business use only.
2. Pay yourself through salary, approved dividends or a properly recorded loan.
3. If you pay a business cost personally, claim it with a receipt and credit your current account.
4. If personal spending slips through, record it as such at once and repay.
5. Reconcile monthly and review the director account.

This answer is general information. Sole proprietors have no separate legal entity, but should still keep business and personal money apart for clear records.