Running personal websites on a company server

[MitchTalmadge]

I have a web server that I am currently renting personally. It runs my personal website and the websites of my business partners (who are also my friends).

We were considering paying for this server with our start-up's funds and putting our company website on it. We are an LLC.

The problem is that we are unsure if it is okay to run our personal websites on the same server as our company website. Would this provide the ability for courts to pierce the corporate veil in a lawsuit?

I understand the security concerns of running personal websites alongside company websites, but I'm more interested in the legal aspect of it.

Thanks

[vangogh]

First, I'm not a lawyer so take my legal opinion with a grain of salt.

I wouldn't think being on the same server is an issue, except in the case where the company owns the server, which sounds like what you're describing. If the business is paying for the server it's hard to argue that the personal sites have nothing to do with the business.

I wouldn't keep your personal sites there even if it is legal though. As a general rule you want to keep business and personal separate and that's a specific reason why you incorporate in the first place, to keep your personal and business separate.

I have a question for you. What advantage do you get from running your personal sites on the same server you're going to use for the business site? I'm guessing it's to save the cost of hosting for your personal sites and I would argue that's not a good reason. Spend the money to host the personal sites outside the business. You can have all 3 run on the same hosting account if you want, but keep it separate from your business. I don't see the advantage of keeping them together and I can see potential downsides. My guess is this could present legal issues in the future, though again I'll point out I'm not a lawyer.

[Harold Mansfield]

Web hosting is cheap. In the name if keeping business from personal, and assuming you aren't running the server yourself but are paying for hosting...just move the personal sites to your own personal hosting accounts. If you guys want to get together and get a VPN or dedicated server, then do that.

Keep business and personal separate. Doesn't matter if it's just a few bucks a month, then spend the few bucks.

[MitchTalmadge]

Thanks guys. The main reason was to save on costs. I don't have a job, and I'm just getting out of high school. I've been relying on the money earned from either freelance work or my grades (allowance) to pay for the server. The server is a $7 VPS w/ 4GB of RAM, 3TB of transfer, a 4 Core CPU and about 100GB of HDD space. It was a steal at the time that I signed up, and the company I use (CrownCloud) doesn't offer the same package anymore, yet they still charge me the same, which is nice.

Thanks for the advice!

[Harold Mansfield]

We all understand boot strapping when you're first starting out, but don't get ahead of yourself and let your wants over shadow what you can afford to actually do. An LLC is a good idea when you have partners, but it also comes with some responsibility...one of which is not mixing business and personal funds and expenses.

If you're not in position to do that in all aspects of your life then don't rush into it and screw it up with a bunch of commingling of your business and personal life.
Your personal website is your personal life. I'd want to keep it away from my business.

[MitchTalmadge]

I understand that completely. I'm not entirely sure I would have put my personal websites on the same server as the company website even if it didn't come with any possible legal consequences, but the question went through my mind of whether or not that would provide the ability to piece the corporate veil. That's why I came here, just to ask.

Thanks for the advice, it really means a lot!

[Owen]

If you are a larger company that can afford multiple dedicated servers and has a large trail of data infrastructure, and as long as the rest of the board of your company agrees, knock yourself out. You could open a part of the server and host it.

However, since you only have a 4GB VPS with no money on hand, just pay for shared hosting.

Also, I finally reached 500 posts :cool:

[BizAdvisor]

Where are the startup funds coming from?

[MitchTalmadge]

All three of the owners in this LLC (myself included) will be contributing equally to the startup costs. We haven't finalized the costs yet, but I have enough money saved up to contribute my part. Honestly, the problem is not that I can't afford a second server, I'm just trying to save money where I can. Call me a penny-pincher if you will, but the main reason for considering putting all the sites on one server was that even with the server only being 4GB, we don't nearly use all of the resources on the server. There is more than enough to run all of our websites, our continuous-integration software, code repositories, etc.

[BizAdvisor]

Well Mitch, the reason I ask about where the funds are coming from is because you were concerned about piercing the veil. However, that really isn't a BIG issue for several reasons... The first being since the LLC is being financed 100% with personal funds and not with any third party business loans or credit. In all honesty, in order to actually get caught of piercing the veil, you'd almost have to tattle tale on yourself. Generally, when a person is accused of piercing the veil, it is because creditors themselves get suspicious of non-business related activity on a business' credit report; i.e. lavish vacations, home repairs, gifts for family and friends... etc. It's mostly creditors who ultimately threaten litigation for business owners piercing the veil.

Secondly, because, even though the server may be used for non-business activities... It is still technically being used for the business purpose in which it was intended. Kinda like writing off a work truck as a business expense, even though you still use it to drop your kids off at school, go grocery shopping, and do day to day tasks.

[MitchTalmadge]

Thanks BizAdvisor, I appreciate the feedback! I had never thought of the truck analogy before.

[Fundist]

Hi Mitch,

Some really interesting answers here. You need to chat with a lawyer that knows something about businesses. Yours is a common issue that has a very clear cut solution, but there are Bar rules that can step into giving legal advice on forums (not to mention malpractice concerns).

[MitchTalmadge]

Thanks, Fundist. I'll ask around to see if I can find a lawyer that is willing to help. :)

[Fundist]

Yeah absolutely. This is a very important question - especially when starting a company.

[Harold Mansfield]

Been thinking more about this and while I think we're giving you the responsible, correct answers to keep business and personal separate..what's the real risk?
You get audited and it's discovered that you're writing off personal expenses with company money?
Fine, just list the percentage of cost for the personal sites and log it as salary or income.

What's the other real risk? That something litigious happens and you are forced to somehow allow access to your server which includes your personal sites?
How exposed are you? Is that a real possibility?

This is one of those things that no one would probably ever think to look for or ask about if you hadn't mentioned it.
Is it illegal? Maybe if you were a large company and reporting expenses without divulging it. If a significant portion of expenses was your personal stuff, yeah I'd be pissed and ask for your resignation. But that's not the scope of what we're talking about.

When it's just you and your company and your server, I wouldn't worry about it.
I wouldn't want my personal stuff with company stuff, but that's just me. Then again everything I host on my server is business related in some way.