LLC Liability Question...Plus some useful business books

[Heatmaker45]

I have a small business (an LLC) that resells gift cards that I buy online.

However, the prices of the gift cards that I buy online are somewhere between 40%-60% off the retail value of the card and I suspect these cards were acquired illegitimately or through some type of fraudulent activity, but I have done some research and couldn't find any evidence proving that this is so.

Also, the gift cards are available at these same low prices at most online auction sites like eBay, Sell.com and others.

My question is, if these gift cards do turn out to have some fraudulent or maybe even criminal activity behind them, what type of legal action can be brought against my company for selling the gift cards to my customers and what steps can I take to further protect myself if that is the case?


here are some useful business ebooks for the fam...

18 Steps for Starting Your Business

The Business Start-Up Kit

 

[CybaCipha]

I have a small business (an LLC) that resells gift cards that I buy online.

However, the prices of the gift cards that I buy online are somewhere between 40%-60% off the retail value of the card and I suspect these cards were acquired illegitimately or through some type of fraudulent activity, but I have done some research and couldn't find any evidence proving that this is so.

Also, the gift cards are available at these same low prices at most online auction sites like eBay, Sell.com and others.

My question is, if these gift cards do turn out to have some fraudulent or maybe even criminal activity behind them, what type of legal action can be brought against my company for selling the gift cards to my customers and what steps can I take to further protect myself if that is the case?


here are some useful business ebooks for the fam...

18 Steps for Starting Your Business

The Business Start-Up Kit

1. How are you buying these gift cards? On your personal credit card? On your business credit card? On you personal paypal? On your business Paypal?

1a.If your business paypal or credit card is connected to your personal accounts then you've already pierced the corporate veil and nullified an protection an LLC can provide.

2. If you can get the same gift cards legitimately for a low price ... why are you buying gift cards of questionable origin?

3. Depending on your answer to number 1 your personal as well as your business assets might be in jeopardy.

4. Thanks for the books.

 

[Heatmaker45]

Thanks for replying Cyba

Number one, I do all my transactions through my business PayPal account, but I don’t understand what you mean when you say

1a.If your business paypal or credit card is connected to your personal accounts then you've already pierced the corporate veil and nullified an protection an LLC can provide.

I used to have a personal PayPal account but then I upgraded it a business Paypal account when I started the business, so would that be a problem.

Secondly, I’ve only seen the cards available at these prices online and they are well below the regular wholesale prices. I only started the business to make some side money because of the obvious profit potential if I sold them locally.

The other thing is that I looked at the feedback's of the people selling the cards and they have been selling for a while without many negative ratings, which means that the cards do work but I can’t understand how they can afford to sell them for so little.

Anyways, I wanted to know if anyone had any specific suggestions on how I can better protect myself and how much I responsibility I would have to bear if I am just an unwitting reseller.

 

[CybaCipha]

Thanks for replying Cyba

Number one, I do all my transactions through my business PayPal account, but I don’t understand what you mean when you say

I used to have a personal PayPal account but then I upgraded it a business Paypal account when I started the business, so would that be a problem.

Secondly, I’ve only seen the cards available at these prices online and they are well below the regular wholesale prices. I only started the business to make some side money because of the obvious profit potential if I sold them locally.

The other thing is that I looked at the feedback's of the people selling the cards and they have been selling for a while without many negative ratings, which means that the cards do work but I can’t understand how they can afford to sell them for so little.

Anyways, I wanted to know if anyone had any specific suggestions on how I can better protect myself and how much I responsibility I would have to bear if I am just an unwitting reseller.

Is your paypal account in your name? Or is it in the name of your LLC?

Did you get a tax ID number / EIN number for your LLC yet?

Do you have a bank account in your LLC name?

Do you have a credit card in your LLC name?

Is the LLC bank account/credit card linked to your paypal account?

 

[Heatmaker45]

Oh ok, I see what you're saying now, basically keep all business accounts and my personal accounts completely separate.

My Paypal account is in the name of my LLC but it is linked to a personal account, so I should probably change that.

I aleady have tax ID # / EIN #, a business bank account, and I am in the process of applying for a business credit card now

Thanks alot for the info

 

[CybaCipha]

Oh ok, I see what you're saying now, basically keep all business accounts and my personal accounts completely separate.

My Paypal account is in the name of my LLC but it is linked to a personal account, so I should probably change that.

I aleady have tax ID # / EIN #, a business bank account, and I am in the process of applying for a business credit card now

Thanks alot for the info

Yes keep them completely separate ... FOREVER.

Don't ever comingle funds ... if anyone sues you and they find out that you are comingling funds then your personal assets are fair game.

Back to the items in question ... the gift cards.

If you think they are tainted and someone finds out that you think they are tainted after they buy it from you they can get you in trouble. Since you already made it public knowledge that you might be selling tainted gift cards, I suggest you investigate and try and find out if they are tainted. If your investigation turns up nothing ... LEAVE IT ALONE. Don't discuss it, not your problem because as far as you are concerned you have done your due diligence. Otherwise stop buying from your supplier.