What is wrong with using business money for personal expenses?
A company is a separate legal person, so its money is not the owner's. Paying personal bills from company accounts muddles the books, may breach restrictions on loans to directors, and can lead LHDN to disallow expenses or treat payments as income. Use a director's account or proper salary instead.
Even a company with one owner-director has its own bank account, assets and liabilities.
Problems caused by mixing
- Records become unreliable, making section 245 compliance difficult
- Personal items booked as business costs are not deductible for tax and could be challenged
- Payments for a director may be a loan caught by the Companies Act restrictions, or may be taxable remuneration
- The limited liability protection can be weakened in disputes if the company is treated as the owner's personal pocket
- Audits and loan applications become harder
What to do instead
- Keep separate bank and card accounts for the business
- If you pay a personal item by mistake, record it in the director's current account and repay it
- Pay yourself through salary (with EPF and PCB) or dividends, as advised
- Keep records of reimbursements for expenses a director paid personally for the business
- Do not use the owner's personal account for business receipts
Sole proprietors are not legally separate from the business, but separate accounts are still best practice to show clean business income for tax.
Legal basis
- Companies Act 2016, s.245
- Companies Act 2016, s.224
Sources
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- What if I lost a receipt or invoice for a business expense?First ask the supplier for a duplicate copy or statement. If that fails, assemble alternative evidence such as the bank record, a written explanation and any correspondence. Alternative evidence may support the entry, but tax deduction is not guaranteed, so do not create fake documents.
- What is the difference between bookkeeping and accounting in Malaysia?Bookkeeping is the day-to-day recording of transactions: sales, purchases, payments and receipts. Accounting uses those records to prepare financial statements, interpret results and support decisions and tax filing. Good bookkeeping comes first, because accounts can only be as reliable as the entries beneath them.
- Is a Sdn Bhd legally required to keep accounting records?Yes. Section 245 of the Companies Act 2016 requires every company, including its directors and managers, to keep accounting and other records that explain its transactions and financial position. This applies even to a new, dormant or loss-making company.
- How long must a Malaysian company keep its accounting records?A company must keep accounting records for seven years after the transactions they record were completed. For tax, documents must be kept for seven years from the end of the relevant year of assessment. Use whichever period ends later.
- What documents should a Malaysian company keep for bookkeeping?Keep every document that proves a transaction: sales and purchase invoices, receipts, bank statements, contracts, payroll records, and records of assets and loans. If a transaction is not supported by a document, it is hard to defend in an audit or tax review.