Can the owner of a company pay all personal expenses through the company?

UPDATED: Jun 16, 2011

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Can the owner of a company pay all personal expenses through the company?

He pays for 2 homes and an apartment, countless cars, all bills, clothes, food, entertainment. Is there anything I can do to stop this and to shut him down?

Asked on June 16, 2011 under Business Law, Illinois


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

He's the owner of the company--it  is entirely his right what to pay through his business. He may elect to put all his expenses through the business if he likes.

That said, if he breaks the tax law in some way, he can face substantial liability--fines, penalties, interest, and possibly jail time, too. The owner of a business may have the business pay all his expenses BUT non-business-related expenses cannot be deducted as business if the apartment, for example, is used for visiting clients and for work, maybe that could be deducted, but not the homes if they have nothing to do with the company. Similarly, some entertainment and food is likely legitimate business expenses (e.g. meetings, client entertainment), but much is not. As long as he plays straight on what he deducts and what he doesn't, he's not breaking the law in this regard; but if he deducts non business expenses, he may be violating tax law.

Also, while a company can reimburse someone for a business expense (i.e. business travel) without it being taxable income, alot of what you describe *would* be considered income that he has to pay taxes on. Again, as long as he pays the right taxes, he can do this; but he has to pay taxes on payments made on his behalf, such as, again, non-business expenses, which would constitute income.

If you believe he is violatiing tax law, one option may be to contact the IRS, if you feel strongly enough about this.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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