Money, sales tax and addresses · A term for founders abroad
What is commingling?
Mixing a company's money with its owner's; the most common way an LLC's owner loses the liability protection the LLC exists to provide.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 22 of 105 in the glossary, filed under C.Every term, A to Z
Commingling, for a founder abroad.
An LLC protects its owner because it's a separate legal person with its own money. Paying personal bills from the company account, or company bills from a personal one, is exactly what a court looks for when it's asked to look past the company to the owner.
- Open the business account before the first sale.
- Pay every company cost from the company's account or card.
- Pay yourself by a transfer recorded as a distribution.
- Record anything you paid personally as a contribution, on the day you paid it.
What founders ask next.
- Can I pay a personal bill from my LLC's account?
- Don't. If it happens, record it as a distribution to yourself the same day.
- I paid early company costs on my personal card. Is that commingling?
- Not if you record each one as a capital contribution on the date you paid it. Keeping the money separate shows how.
03 · See also
- Money, sales tax and addressesPiercing the corporate veilA court holding a company's owner personally liable for its debts, usually because the company wasn't run as separate from the owner.Read the term
- The company itselfOperating AgreementThe private contract among an LLC's members that sets ownership, management and what happens when someone leaves; it isn't filed with the state.Read the term
- Money, sales tax and addressesNexusThe link with a state that obliges a seller to collect its sales tax, created by a presence there or by sales above the state's threshold.Read the term
- Money, sales tax and addressesEconomic nexusSales into a state above its threshold, usually $100,000 a year, which makes a seller elsewhere collect that state's sales tax with no presence there.Read the term
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