A contractor mixing personal and business funds in one account risks:
Explanation
Commingling personal and business money is one of the classic facts a court relies on to disregard a corporation or LLC and reach the owner's personal assets, and Corporations Code §17703.04(b) makes clear that the shield depends on the entity being treated as separate. The mixing also makes the records unreliable for tax and job costing. It does not improve the current ratio; it corrupts the figures that ratio is computed from. Licence renewal depends on fees and bonds, and sales tax rates are set by law.
Law Reference: Corp. Code §17703.04(b)This topic, taught in full in the CSLB Law & Business guide. CSLB Law & Business — Complete Study Guide (2026) — PDF + EPUB, $24.99 · 14-day refund →
Practice all 1632 questions free — no signup required.
Own the complete CSLB Law & Business guide — PDF + EPUB, $24.99 →
Related questions on this topic
- A contractor pays estimated federal taxes of $6,000 per quarter. If he skips a quarter to fund payroll and pays it late, the likely consequence is:
- A contractor with a 2.0 current ratio has $160,000 in current liabilities. What are his current assets?
- A contractor's markup covers overhead and profit. If direct costs are $80,000 and he applies a combined 25% O&P markup, the profit portion is $8,000 while overhead recovery is $12,000. What is the contract price and total O&P?
- A contractor's books for the 2026 calendar year show $61,400 of wages paid to two payroll employees, and $1,800 paid to a licensed drywall subcontractor who is not an employee. Which year-end information returns must the contractor issue?
- A California employer paid one employee $30,000 of wages in tax year 2025. FUTA is 6.0% on the first $7,000 of each employee's wages, and California's 5.4% state credit was cut by a 1.2% credit reduction that year. What FUTA tax does the employer owe on this employee?
- A contractor's balance sheet shows current assets of $180,000 and current liabilities of $215,000. What is the working capital, and what does the answer tell the contractor?
Last reviewed: · editorial process