Who is responsible for the debts in a limited liability company?

Answer 1

The general answer is "NO" since the whole reason that states enacted limited liability company statutes was to limit the liability of the owners of the LLC to the amount of their investment. However, a member of an LLC can be personally liable for debts of the LLC in certain specific cases. Some examples include:

* a member is liable if he guaranteed the debt * a member can be liable if the debt was obtained through fraud * a member can be liable for the LLC's failure to pay over payroll taxes to the IRS * a member can be liable if he took money out of the LLC at a time when it was insolvent

* a member can be liable under a "piercing the corporate veil" theory

Answer 2

No, unless a shareholder, officer or director has signed a debt in a personal capacity.

The purpose of a corporation is to shield corporate owners and officers and direntors from liability including debts of the corporate and actions for wrongful actions like auto accidents while driving a corporate car, or death of an employee of the corporation while acting as an employee. A lender or a person hurt by an accident may only sue the corporation for the liability in a "perfect world".

However, there are several ways to have an individual owner etc. become personally liable. First, if a corporation needs an operating loan it is not unusual for a lender to require an individual to sign as a gaurantor of the loan, or a co-debtor. If an individual acts in this individual capacity, he or she can be personally liable for the debt in which he or she acted as an individual.

Second, if a person has treated the corporation as his own personal account, and the assets of the corporation have not been kept separate for corporate use only, a court can order that the corporate veil be pierced. This effectively means that the corporation is treated like any other sole proprietorship and all individual protection is lost.

Third, (but probably not last) if a director or officer signs documents on behalf of the corporation but does not use his or her title, he may be liable on that document - personally. As an example, if the corporate president John Smith, signs a corporate check paying for a shipment of lumber, and does not sign it "john smith, President" he may have personal liablilty to cover that check.

Answer 3

A limited liability company (LLC) is the United States-specific form of a private limited company. It is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

As in a corporation the debts are limited to the company (a fictitious business entity) and cannot be passed on to the ultimate individual owners (usually real individual persons).