Are You Commingling Multiple Businesses?

If you own multiple limited liability companies or corporations are you commingling the businesses?

If so, you expose these ventures to unnecessary legal dangers.

For example, a court might decide one company is the alter ego of the other and hold both of them liable in a lawsuit. Instead walls of protection, you’ve let down the drawbridge and invited in plaintiffs to raid all of your companies.

So, how do you avoid this commingling danger?

Treat them as separate companies.

For instance, don’t raid the bank account of Company A to pay Company B’s expenses simply because the latter is short on cash.

And when the entities do business with each other, use written contracts that explain the rights and duties of each entity under the agreements.

For example, if Company A wants to advertise on Company B’s website, there should be an advertising agreement in place where B gets compensated somehow by A for running the ads. No freebies from one company to the other simply because you own both.

What about intellectual property? If one company owns the IP, but you want both companies to use it, chances are you’ll need some type of licensing agreement between one entity as owner (licensor) and the second entity as licensee.

An experience business lawyer can help you put the right documents in place to protect your multiple businesses from improperly commingling. And if you’ve already been commingling, he can help you fix the situation to minimize the legal risks.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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