No. Don’t commingle personal funds and credit cards with the startup’s credit cards and accounts. Even if you are going to miss out on points or convenience, it’s a bad idea to commingle.
This is a thing that the IRS would look at if they ever audit your startup. The IRS really cares about money that goes from the corporation to the founders/owners/executives - they want to make sure the Treasury is getting their piece of the action, if you will. So you don’t want money moving back and forth and getting mixed up between a personal and business expense.
Secondly, if you are like our clients, you are going to raise capital from outside investors. Professional investors won’t want your personal expenses mixed in with the company’s expenses.
It will also make accounting a lot harder. And heaven forbid something looks off to one of your venture capital investors; you don’t want anyone to ever doubt that you are doing the right thing for the startup’s finances. Even if you are not doing anything odd, introducing doubt is a bad idea. Remember that as CEO, you are a fiduciary for your investors’ capital and the business. Don’t put the business at risk.
As we mentioned, there are now a lot of great tools to help you manage your startup’s finances - including some tech-forward (and tech company friendly) credit card companies like Brex and Ramp. These tools give CEOs and VPs of Finance a lot more control over who uses the corporate card for what expenses. Plus, they have startup-focused points. Plus, the founder does NOT have to take on personal liability for the company’s card balance.
What happens if you use the corporate card for personal use?
We’ve already outlined that the CEO shouldn’t use a corporate card for personal expenses - so it should be obvious that other employees should not use the corporate card for personal expenses. This is actually one of the most common ways we’ve seen fraud committed against startups.
Founders or their VPs of Finance should regularly audit the use of corporate cards. Other best practices include setting spending limits to reduce the potential for major fraudulent purchases.
What happens if the use is accidental?
If personal expenses are accidentally put onto the corporation’s credit cards, the CEO or employee who made the mistake should document the mistaken charge - including making copies of the receipts. Each corporation should have a procedure for reporting these mistakes, which should be documented and followed. Finally, the employee should reimburse the startup for the amount that was accidentally put onto the card. This reimbursement should not be recorded as revenue.
Founders - don’t use the corporate card for personal expenses
So the days of a Delaware C-Corp that has raised professional funding using a founder’s personal card are basically over. Don’t mix your company’s expenses with your own; don’t get an old-school card that puts the liability onto you.
Vanessa Kruze, a seasoned CPA, has an impressive track record prior to establishing Kruze Consulting. Her experience includes pivotal roles at Deloitte Tax and as a controller for a substantial startup with over 120 employees and $20 million in revenue. Under her leadership, Kruze Consulting has emerged as a distinguished CPA firm, recognized on the Inc 5000 list for five consecutive years, illustrating rapid growth and success in the competitive accounting landscape. Vanessa's unique approach, combining deep industry knowledge with advanced automation and software solutions, has positioned her firm as a leader in providing comprehensive accounting services to startups across the United States.
