The LLC laws of every state have a specific liability limitation provision which basically states that a member or manager shall not be personally liable for business debts, obligations or liabilities merely because he is the owner.
This is a very advantageous benefit because without protection, an individual running a business is completely liable for all business related obligations. However, this law is not a license to be able to unlawful things and hide behind a veil of protection.
So, an individual cannot break the law, commit a fraud or do something unlawful and then claim that he or she was only acting on behalf of a limited liability company.
Another important factor that has caused members of an LLC to be liable is when a member conducts business but never lets the other party know that it is a legal entity and not him personally that is engaging in business activity. It is important to always let the world know that it is an LLC operating the business. You are an agent working on behalf of the LLC business.
This is one example of where members may be held personally liable if actually sued. There are a string of other situations where the protection veil of a limited liability company can be pierced. If you would like to learn more about these other situations and what you can do to avoid them, you should read The Six Step LLC Formula to LLC Protection- an eBook offered by The LLC Expert, LLC.
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Wondering whether to start an LLC for your new business?
Many think that if the business will only be owned by one person or if the business is going to be small with very little revenue, then the LLC is not required. To the contrary, this is the wrong thinking that has caused many personal liability problems for others.
Listen to this video by Amyli McDaniel which explains how a prospective business owners should assess whether he or she can benefit from the LLC protection afforded by the limited liability company.
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