Client is a single member PLLC. He pays personal expenses from his business and I have informed him this is not permitted. The regulations under the Secretary of State says this cannot be done. Under IRS rules, if he is audited, various deductions could be disallowed. Is there any other consequences due to Federal tax laws? As a single member PLLC, if sued, would "piercing of the corporate veil" be applicable?
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Yes LLC vail would be pierced.This post is for discussion purposes only and should be verified with other sources before actual use.
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I agree, however the limited liability for a professional LLC is very narrow anyway. I do not know what you are referring to regarding IRS rules since he is a disregarded entity was Federal purposes so all rules as a sole proprietor would apply for taxes. Only an attorney can answer the extend to which he is exposed and every State is different.Originally posted by BOB W View PostComment
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So are you saying that he is treating payments for personal payments as a business expense? That is a big no no.Originally posted by Forensicacctnt View Post
If he is posting payments for personal items to a draw account, it's not the optimal way to handle things, but it shouldn't cause big problems.Comment
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I have a 2nd year Partnership doing the same thing. I was SO PISSED off when I was handed 7 months of statements on 03/12/2023 to finish their TWO partnerships.
Only to find payments to every credit card under the sun as well as 100 other personal expenses. Dinner, Gas, etc.
Now I have to sit down and have THIS DISCUSSION when I have 2 minutes to breath.
Matthew Jones
Tax Preparation
Computer Consultant
Tax Season is here!
Make sure everything is working, extra ink or toner is available, Advil in top drawer!
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Very common for people to do this. Even if they have separate accounts, they will write out of the wrong account when the other account gets strapped of cash. One possible deterrent to this is to assign someone to go through all the payments and charge for their time. if you ask the client to do this, he'll say "I dunno".Comment
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Thank you for the responses to my question. I was incorrect to ask about Federal tax rules when this is a single member LLC and thus a disregarded entity. The client pays some personal expenses with his business credit card. He is does not classify them as business expenses. It makes for extra work because he will not use a personal credit card for his personal expenses.Comment
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