Maintaining LLC Liability Protections

By Pat Geddie | Leave a Comment

Many business owners choose to form a limited liability company (LLC), often due to this entity’s protections from personal liability for business debts. When you form an LLC, the company becomes a separate legal entity from yourself, unlike a sole proprietorship or basic partnership. This generally means that parties cannot go after your personal assets or property to satisfy business debts or judgments. However, there are certain situations in which an LLC owner may become personally liable. A small business lawyer in San Francisco can help ensure that you maintain LLC liability protections whenever possible.

Piercing the Corporate Veil of an LLC

In some cases, a court may allow a creditor to “pierce the corporate veil” of an LLC and hold owners personally responsible for payments. There are different reasons the corporate veil may be pierced, including:

• The owners failed to keep personal and business affairs separate – This often occurs when LLC owners comingle business and personal funds, such as paying personal expenses and bills out of a company account.
• The owners acted wrongfully – If the LLC owners took on debt based on fraudulent information or with the knowledge they could not repay the debt, and the creditor suffered an unjust loss as a result, the court may hold owner personally liable to ensure the debt is paid.

The main concern for LLC owner is proper financial separation and record-keeping regarding business funds and personal funds. This can often be difficult for some small business owners, so you should not hesitate to seek professional help.

Learn How a Small Business Lawyer in San Francisco Can Help

Our San Francisco small business attorneys at Primum Law Group regularly advise LLCs and other small business owners regarding a variety of issues, including liability protections. Please call 415.293.8042 or contact us online for more information.