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Ask a Lawyer -- LLCs
LLC Question 127
Question:
I have recently started an LLC. I'm a small time contractor here on Maui. I would like to know if I pay my personal mortgage payment or any non buisness bill with my LLC checking account as I had been when I was a DBA, does this expose my home and personal assets, and make the vail of the LLC penetrable in a potential law suit?? Thus invalidating the whole purpose of the LLC.
Thank you very much.
Response: It is highly recommended that you not pay personal expenses out of your LLC checking account. It may lead to the argument by creditors of the LLC that you have co-mingled the LLC assets with your personal assets. Another similar argument is that you as the business owner have disregarded corporate formalities leading to a claim that the business is your alter ego. See Robert's Hawaii School Bus, Inc. v. Laupahoehoe Transportation (Hawaii S.Ct. 1999) and piercing the corporate veil. Will payment of a few personal bills each month out of the LLC checking account, if properly accounted for on the LLC books, cause you to be personally liable for LLC debts (or vice versa)? Probably not without additional facts but why do it? Have the LLC write you a check as a capital withdraw then pay your personal expenses out of your own checking account. It's not that hard. If you have already been paying personal expenses out of your LLC checking account, I do not think it is ever too late to end the practice and begin proper segregation of funds.
Submitted: 09/03/2007; Jose, Hawaii
Response: 09/03/2007; JJR
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