The commingling of funds or assets can pierce the corporate veil and open you personally to the liabilities of your business or company.  If you are one of the members in an LLC you need to ensure all partners handle money and assets correctly.  What is commingling?  When you use company assets or funds for personal debts or purposes it is commingling.  When you use your personal assets to cover company debts or liabilities it is also commingling.  Many new business owners and entrepreneurs blend personal and business resources when things get tight.  You must resist the urge to blend company assets with personal funds and vice versa.

One of the most common sources of business disputes, shareholder disputes and disputes between members in an LLC is the inappropriate use of company funds and resources.  Your company is a business entity.  The business entity exists for one primary reason: to separate your company’s debts and liabilities from its owner’s personal assets.  The business entity further provides protection to your spouse and family.  The commingling of funds or assets can pierce the corporate veil exposing any owner or member to personal liability for business debts.

When you conduct business affairs correctly a creditor cannot come after your residence or personal accounts to satisfy a company debt.  The corporate veil also protects the other members in an LLC and your business partners.  The business entity protects your partners and their spouses and family as well.  If you suspect your partner or another member in your LLC is using company funds for personal reasons we can help.  If you suspect your business associate of theft we can help you to put a stop to it.

Pro-Tip: We have experts that we use that can look at financial records better than a regular CPA. They’re called forensic CPAs. They can do a spot audit if we find something’s off five bucks, it’s the same as if it’s off 5 million, right. Numbers should match to the penny. If they don’t, it’s not hard to go find a reason why not usually it’s just a human error, you know, an accounting error. But if it’s not, sometimes we find it leads to real large theft.

Commingling is a threat to the person doing it.  It is a threat to every other owner in the business.  If the company creates some type of liability, the first thing creditors look for is evidence that will allow them to pierce the corporate veil and get at the owners, personally, to collect on any debt.  The best defense, therefore, is to make sure your corporate entity is kept up-to-date, including all governance and the corporate documents, and to prevent any commingling, whatsoever, of personal funds or assets with the business, and vice-versa.” – Dan Watkins, Founding Partner

Commingling of funds or assets can pierce the corporate veil and open you up to be personally liable for company debts.  Creditors will seek access to company and personal records in an attempt to prove commingling.  This allows them to go through the legal protections of the business entity to come after its owners personally to satisfy the debts of the company.  If you suspect a partner or fellow business owner of commingling we invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.  We can help you to protect your exposure, put a stop to the commingling and protect your company and your own interests.