Home > Research Legal Advice > Business > Can i be liable for company debt if I have not signed any type of contract?
Asked about 1 year ago - Las Vegas, NV
FlagI was in a llc with three people. I left the the llc, and now my former partner is calling me telling me that I need to come to the office and sign papers so I wont be liable for company debt in case they file for bankruptcy. I just need some advice on what to do because I have signed anything that would make me personally liable.
May I add just one more point to what the previous attorneys have written. Another quite common way to pierce the corporate veil by a creditor of an LLC in Nevada, which again means that the owners (called "members") can be held personally liable for the liabilities of the LLC, is when the creditor can show that the LLC DID NOT HAVE SUFFICIENT CAPITAL to operate and, perhaps more importantly, did not have sufficient capital to incur the debts that it now claims that it cannot afford to repay.
Of course when a legitimate LLC "fails" by not being able to earn profit and by not being able to pay all of its creditors, this fact alone does not of itself expose its members to personal liability (with certain exceptions, such as the "alter ego" theory of veil-piercing discussed above). But if the business fails due to either NEVER having had sufficient capital to operate or having been raided of its capital and then having incurred new debt, this can open the door in Nevada to a creditor of the LLC going after the members personally. As a general rule, then, a member of a Nevada LLC with insufficient capital faces a greater risk of being exposed to personal liability than a member of a Nevada LLC with sufficient capital. Best wishes.
Some business debts will be personally guaranteed by the principals in the business --including you, a member of this LLC, unless you got a release or indemnity agreement when your left the company from your co-members and/or from the creditors -- because landlords, credit card companies, etc. won't allow a business credit without these personal guarantees.
You can also be held liable for business debts if you committed any torts, or signed your own name and not the company's, to contracts, and if you failed to observe corporate formalities like keeping the finances of the company and your own finances separate or provided any other reason to "pierce the corporate veil."
Before you sign anything, especially things you don't understand completely, have a lawyer review it. After you sign, it's going to be too late.
Unless you signed some agreement giving your personal guaranty to pay should the company become insolvent, under LLC statutes you are not personally liable for the debts of the company. Now there are some exceptions. Creditors can attempt to "pierce the corporate veil" if the individuals were really acting for themselves and not for the corporation. Another example is if the LLC is the "alter ego" of one of the officers. In other words, if the officer is using the LLC as a shield for his/her own self-dealing, then the officers could be personally liable. Contact a business attorney for more thorough advice on your situation.
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