Question

Mike, a managing member of Big House Realty, Corporation, often uses his company credit card for personal expenses like dry cleaning and new clothes. He insists that these are business expenses because he must wear new clothes in order to show houses. Is Mike at risk of losing his liability protection? Why or why not?

Answer 1

Corporate business cards are furnished to the employees which let them charge their authorized business expenses without having to use their own card or cash. But many employees tempt to use their business credit card for personal expenses because of the multiple benefits associated with them. It is difficult to know if the business is running profitably if personal expenses like groceries, haircuts, clothing purchases, etc. are being run through the business credit card. Moreover, It makes it much more strenuous to manage cash flow, calculate cash runway, etc.  

So Mike may be at risk of losing his liability protection since most business credit card issuers will make the employee sign an agreement where him/her agree not to use the business card for personal expenses and if the employee violate the terms of the agreement, then they have the leverage to cancel the card. Co-mingling personal and business funds presents a risk because it can allow courts to pierce the corporate veil and hold the individual personally liable for business’ liabilities.