Legal Question in Business Law in California

Just account for the personal expenses as a loan on the corporate books and records. You can also allocate the personal expenses as compensation or as a part of your wages. If you have an accountant or work with a payroll service they should be able to assist you in working through the details.

I agree with Mr. Rimer that the loan will work, if you show it being paid back, and this is an uncommon occurrence. Bear in mind, however, that piercing the corporate veil is an equitable remedy. So no amount of accounting entries will protect you if you use the corporate accounts as an ATM. The good news, however, is that if there is no pattern and practice of disregarding the corporate formalities, and/or if he corporation is solvent and can answer for its own liabilities and debts from its assets or insurance, allegations that the corporate veil should be pierced will get nowhere.

To recap, you can treat this as a loan from the company to you or as an advance against future pay (which is deducted from your next paycheck). This happens in large corporations, as well as small ones, so is not determinative that the corporation is an alter ego.

What is important, though, is that you document the transactions with a formal memo (for the advance) or promissory note (for a loan) and a corporate resolution showing the directors approved. If you are the sole shareholder, you can do a "consent in lieu of meeting" instead of corporate minutes, but the resolution language would be similar. Keep these documents in your corporate minutes book. It is the lack of corporate records that can pierce the corporate veil and have the corporation declared an alter ego.