Legal Question in Business Law in Ohio

Limited Liability Corporation Owner using company money to pay for new home reno

Owner of LLC using company funds, not owners salary or pay, from a company that has not shown a profit in more than two years to pay for renovations for new home purchased in 2004. Company Credit cards have and are being used to purchase and pay for materials, company employees are being used to work on house and labor is being paid for out of company funds, money is being taken from the company checking account to pay for refurbishment. Owner is hiding expenditures by claiming they have been ''Shop'' expenses. Is also asking employee who enters this information into company accounting software to lie and state that these expenditures are for the business.

Is this legal and could the employee being told to enter incorrect information into the company accounting records be legally responsible for be in trouble legally?

We have been told that the owner is not allowed to take money from the company unless the company shows a profit and then and only then can the owner use money in the amount equaling the profit amount.

Can you advise?


Asked on 3/18/05, 9:38 pm

1 Answer from Attorneys

Re: Limited Liability Corporation Owner using company money to pay for new home

Expenses have to have a business purpose to be deductible. The owner can take distributions and a salary but must claim it as income on his or her tax return. If it is a multi-member LLC then the other Members should be watching what is going on and putting a stop to it. If the owner is trying to claim these are business expenses and reducing his or her income, then that is incorrect. As to the person entering, it will come down to their authority, position, ability to challenge supervisor, etc. as to whether IRS would find them to be a "responsible person".

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Answered on 3/19/05, 2:52 pm


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