Are Owners Personally Liable for Corporation or LLC Obligations?

Under state law, the owners of a corporation or an LLC are generally not liable for the debts and obligations of the entity.  But there are exceptions.  Actually quite a few exceptions.  For example, you can never avoid liability for your own actions.  So if you are driving a car on company business and you run someone over, you are personally liable for the damages.  And it is no defense to say “I was on company business.”  An owner is of course personally liable if he or she signs a personal guarantee for a debt of the corporation or LLC.  But  an owner can be liable as a "responsible party" for state sales taxes, federal and state employee income tax and payroll tax withholding, and other “trust fund” type taxes under state and federal law simply by being an officer or manager.  A more complete list of situations where the owner of a corporation or LLC can be personally liable will be included in a future blog. 

It is still important to run your business in the form of a corporation or LLC.  But it is also important to adequately insure your business against risk.  And even more important to be aware of, and avoid if possible, situations that put your business and personal assets at risk.

Here’s hoping you find this material helpful.  If you like what you read, pass the information and the website to a friend.  If something you read here raises a question, don’t hesitate to call.  Jsenney@pselaw.com or 937-223-1130.

AND ONE MORE THING:  Want to save self-employment/payroll taxes on payments to owners?   Owners of partnerships and most LLCs pay self-employment tax on every dollar.  “S” corporation shareholder-officers don’t.  Give me a call if you want to know why.  Jsenney@pselaw.com or 937-223-1130.