What happens when personal assets and business assets are intermixed in a dispute?

On Behalf of | May 11, 2022 | Business Disputes |

Starting and maintaining your business can mean being creative when it is time to finance your next move.

Ideally, you may prefer that your business assets are separate from your personal assets. Still, challenging times may mean you use one to support the other. While it may not be a problem at first, using a combination of assets can make the issue more complex when there is a dispute.

Here’s what you should know about dealing with a dispute when personal assets are part of the business.

Losing corporate protection

The advantage of certain business entities is that you can protect your personal assets if there is a dispute with your business. This division allows you to maintain separate personal and business assets and associations.

When you intermix personal assets with business assets, it can appear that there is no purpose for the protection of using a corporation or LLC entity for the business. The corporate veil that protects your personal assets is at risk in cases like this.

Looking for records

Frequently, during a dispute where there are mixed assets, it becomes a question of demonstrating a legitimate rationale for including personal assets in the business and your method for including personal assets in the company. This can consist of looking into your business records to examine how you used the personal assets and combined them with business assets.

Often, the assumption when a business has intermixed personal and business assets is that you do not need corporate protection or are engaged in suspicious activity.

In some cases, these situations can lead to courts “piercing the corporate veil,” which could make you personally liable for damages in the dispute. These situations can become incredibly complex with serious ramifications. You should talk to a skilled professional and not take this on alone.