Can I be Sued Personally if I have an LLC?

Jason (P) David

An LLC is a separate entity from its owners or member, therefore, the LLC will be liable in a lawsuit rather than the owners or members.

However, an LLC structure will not necessarily protect you from “tort” or “negligence”.

There are a few things to know about an LLC’s limited liability protection and about when it doesn’t necessarily protect you.

How you can still be Sued Personally if you have an LLC:

  • Negligence – examples could include a car accident while using a company vehicle or perhaps you forget to put certain safety measure into place and someone gets hurt.
  • You Commit Fraud or are Reckless – if you commit fraud or are reckless while acting on behalf of the LLC, you could be personally liable.
  • You don’t pay your State Sales Taxes for the LLC
  • You didn’t correctly form the LLC or didn’t even create one at all – simply adding the terminology to your company name doesn’t make your LLC legitimate. You need to form the LLC and file your articles of organization.

Here’s how you can protect yourself from being sued personally if you have an LLC:

  • Don’t sign any personal guarantees – a personal guarantee makes you personally liable should your LLC not meet the requirements of the personal guarantee. For example, if you signed a personal guarantee on a loan for your LLC, you are liable for that loan should your LLC default.
  • Don’t partake in fraudulent activities – for example, if your LLC is having cash troubles or insufficient funds and you knowingly take out a loan, this is considered fraud and you will be personally liable for the loan. Furthermore, if the other LLC members are committing fraud, and you know about it but do not report, it you will also be personally liable.
  • Don’t “Pierce the Corporate Veil” – don’t act in a way that a court might rule that you and the LLC are one in the same.
  • Keep personal and LLC bank account separate
  • Make sure your LLC has the correct insurance plan(s)

If you are honest, careful and follow the rules, you most likely will not be personally liable for anything that goes wrong with your LLC.

However, as you can see, there is still some risk involved and you are never 100% liability free when owning a business.

Understanding the risks and how to avoid them in key to protecting yourself and your business.

FundsNet requires Contributors, Writers and Authors to use Primary Sources to source and cite their work. These Sources include White Papers, Government Information & Data, Original Reporting and Interviews from Industry Experts. Reputable Publishers are also sourced and cited where appropriate. Learn more about the standards we follow in producing Accurate, Unbiased and Researched Content in our editorial policy.

  1. The Curley Law Firm "My LLC Is Being Sued: LLC Protection from Lawsuits" Page 1. April 20, 2021

  2. Upcounsel "Can a LLC Be Sued?: Everything You Need to Know" Page 1. April 20, 2021