Attn: Business Law and Small Business Owners - I have a question about business finances. . .?

Question

I work for a small business. This business is privately owned by a woman that is HORRIBLE with money. She uses the business money for her personal spending, she doesn't claim income tax, she hasn't been a legitimate non-profit business since Dec. 31 of 2003 but yet uses her tax exempt number for things. She also solicits donations for the business.

Okay, my question: Can she legally use business money for her personal spending (paying her house payment, buying items for remodeling her home, buying her groceries, buying items for her hobbies, paying for her trips - not business related - and so on)? She has been confronted about this, and she states that her lawyer told her she could legally use the money for her personal spending and bills. The other problem with this? She also is behind on all of the bills that ARE related to the business, and bounces checks out of the business account for her personal things. IS it all legal??

On the non-profit status: She filed for a tax exemption and a non-profit status because the type of business that is run is for people with disabilities/special needs. She STATES that she does not run the business for a profit. Wouldn't that make the money having to go right back into the business (if she is non-profit)? And as for the use of the tax exemption, she uses it for her groceries and personal stuff - not just business expenses. And when she buys something for the business, she takes it home for her personal use.

Answer 1

To answer your first question, yes, since she owns the business, she can spend the proceeds any way she wants to.
To answer your second question, no, bouncing checks is never legal, no matter business or personal.
As for the non-profit status, if her business is a non-profit organization, it has a board of directors, they would be checking on her to make sure she is not violating any law. What I think you may be talking about is a tax-exempt status. Many businesses get a tax exempt status because they are required to purchase supplies for their company from other businesses. These companies are commonly issued a tax-exempt number for business purchases.