Owning a business is an all-encompassing affair where personal and professional life is comingled. It can also involve calculated risks like using personal assets to fund a new professional endeavor or an existing one. It is generally best to keep personal assets separate from business interests, but sometimes it seems like it is the best or most straightforward option. It may not be a problem if no partners are involved, but comingling assets can complicate matters if a dispute arises.
Your personal assets may be at risk
Different business structures involve different options for protecting personal assets if a company becomes embroiled in a dispute. An individual’s home and personal assets should be kept apart from the assets of a limited liability company or a corporation. But, comingling individual and business assets removes a portion or all of that protection.
Once there is a dispute, the owner may need to explain his or her actions and thinking for comingling the assets. He or she will need to describe how it works, and why the personal assets should not be liable for the business debts. Documentation will be necessary to support the claim that personal assets cannot be applied in payment of corporate obligations
Piercing the veil
The suspicious activity can lead to litigation where the courts pierce the corporate veil. If the owner’s actions are consistent with the plaintiff’s complaint, the owner may be personally liable for damages. These situations can be very tangled and have severe consequences for the owner, even if they had the best intentions.
Legal guidance is essential
Personal and professional assets are hanging in the balance, so working with an experienced and knowledgeable business law attorney is essential. Since this dispute can involve litigation, the lawyer should also have extensive experience handling court cases.