What is Commingling and why should a San Diego business owner be concerned about it?
Commingling is the practice of blending personal funds and assets for business purposes or using corporate credit cards, accounts, funds or assets for personal debts, purchases or obligations.
It is important to understand the nature of a business entity. We do not establish an LLC, S-Corporation, C-Corporation or California Professional Corporation to simply provide a name for our enterprise or to legitimize it in some way with the State of California. The first and most important purpose for business formation is to separate “you” the person from “your company” in action, deed and asset.
This is about liability – and a creditor’s ability to “pierce” the protections of your business entity and come after you for everything you have and own. Your corporate entity is like a shield to protect personal assets such as your home, bank accounts and investments. You will encounter challenges in any business – whether it takes the form of tough economic times or a business dispute. When your company owes money for any reason the “entity” limits the ability of the creditor to the assets of your company. They cannot come after you, your spouse and/or your personal assets to settle a debt or obligation related to your company.
Commingling blurs the line between “you” the person, and “your company” – the LLC or Corporate entity through which you should be conducting all business transactions. This isn’t about making life more difficult, or playing at having a company.
If you are a member or shareholder in a company and believe one of your fellow owners is commingling personal and company funds or assets you have a right and responsibility to be protected. Does commingling sound serious? It is. This isn’t just about accounting or taxes, it’s about how your business protects you and the other members or shareholders personally. We invite you to contact our experienced and proven business attorneys or call 858-535-1511 to discuss the protections of your LLC or corporation, and the issues of commingling.