To be fair, many of the manufactured spending options are against company policies in one way or another. If it wasn't there wouldn't be so much YMMV when it comes to finding a store / clerk to process the transaction the way you want it to. Buying a gift card with a CC should trigger the cash advance fees, but they often don't. My credit cards that offer annual travel credits specifically state in the user agreement that the credits will not be granted for buying airline gift cards. Yet there are thousands of dollars worth of free travel codes sitting in my email box that I have accumulated over the years.

It's not really a matter of what do they allow, its a matter of what do they enforce which often times is simply a matter of what can they enforce.

I find it difficult to believe that Square knows who owns the XYZ LLC. There would simply be no recourse for Square since the funds are being charged by XYZ, and deposited into a bank account owned by XYZ. My name would never appear on the merchant statement so there is no way for them to know what is going on. The technique would be legal, but it would be against their EULA so they could theoretically disable my account if they ever found out. The key is finding out. I'll keep you posted if it works or not.