Are your personal assets safe from a lawsuit?

You set up your business as a Corporation or LLC. Most likely your reasoning was to shield you personally from a client/customer being able to get to your personal assets. This makes total sense. The problem is the most common way to pierce the shield of a Corporation or LLC is to find where they have commingled funds. This is the most common and the costliest mistake you could make. It’s sad to say but we are living in a very legal prone world.  So safeguarding ourselves is a very important factor to consider. 

Quickbooks is a common financial software for small businesses. It’s cheap, relatively easy to use (if you understand what you are doing) and it allows you to link your business bank and credit card accounts easily. 

Many start ups don’t have the cash flow to pay all of their expenses right from the start. So, what happens. In many cases paying expenses using a personal credit card is the only way to keep the business open. This can be fine if the transactions are recorded correctly. What I have seen many times is a personal credit card is then used exclusively for the business but that card is still personal. It was not set up by the business, using the business credentials. You have now commingled funds. 

To take this one step further because it’s so easy to link that personal credit card to Quickbooks, many do this.  They are only using the card for business expenses and the system will record those expenses automatically. It makes sense to them to link the account. Unfortunately, you just blew a huge gapping hole in your Corporate shield!

Are your personal assets safe from a lawsuit?