Is it all-legal??

[infoman]

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, and 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??
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Additional Details
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.

[smbwallace]

I'm no expert on this but I worked for someone who basically did the same thing. I'd say it was legal but not a good idea. The point of running a business is of course the same reason we work for someone — to pay the bills — but if you don't put money back in the business it's going to flop sooner or later and you'll be left with a lot of debt. Sounds like this business is being run badly and may not be around long.

If it's not a nonprofit, how does it have a tax-exempt number? Is it an out-of-date number? If it is not a nonprofit anymore it's illegal to use that number.

This business sounds like bad news all the way around.

Oh I just read the "additional details" ... I'm not aware of all the legal implications of what is going on but I still say this business is being run very badly.

[Audrey]

I'm curious why you are working there?

[rfresh]

Based on what I read in your post, the answer is very clear: she is running an illegal business. She has no non-profit status with the state and yet accepts donations as a non-profit business. This is completely illegal and she needs to be reported to the state.

As for her using business money to pay for her personal items, this is illegal too. A corporation owner cannot mix business money like that. I doubt her coporation is legal and I doubt it is in "good standing" with the state she incorporated in, if she incorporated at all.

So the short answer is yes her business is being run illegally and it is in a huge mess.

In addition, she is in big trouble with the IRS for non-filings based on her (wrong) belief that she is running a non-profit business. You have to have a legal non-profit standing which she does not therefore the IRS will not see her business as non-profit and she owes taxes and back taxes. She should also be reported to the IRS - she is in deep trouble and is in a real mess. I seriously doubt any lawyer told her she is "OK" - she probably just made that up.