The answer to this question really depends on the specific circumstances.

One reason businesses create LLC entities is to avoid member personal liability for business contract obligations by having the LLC sign contracts. However, there are possible situations where a landlord can sue a member of an llc lessor such as situations where the landlord has a personal claim pursuant to the terms of the contract, a member personally guarantees the contract, the landlord seeks to “pierce the LLC veil” or in situations where the landlord feels it has a legal claim against the member individually outside of the lease contract.

If you are just starting an LLC, we recommend you read our Six Step LLC Formula eBook to help reduce the likelihood of personal liability and you should ensure the lease contract obligations only apply to the LLC entity. A lease contract is one transaction where it makes sense to hire a lawyer because they generally are a longer term contract and a relatively significant obligation.

If your LLC is already in an arrangement and is facing issue with the landlord, you should seek the advice of a lawyer to determine the possibility or likelihood of any potential member claims based on your situation. As noted, the answer really depends on specific facts and circumstances such as the specific provisions of the contract, whether the LLC member has done anything outside of the contract, and how the LLC has been operated and maintained.

The answer to this question really depends on the specific circumstances.

One reason businesses create LLC entities is to avoid member personal liability for business contract obligations by having the LLC sign contracts. However, there are possible situations where a landlord can sue a member of an llc lessor such as situations where the landlord has a personal claim pursuant to the terms of the contract, a member personally guarantees the contract, the landlord seeks to “pierce the LLC veil” or in situations where the landlord feels it has a legal claim against the member individually outside of the lease contract.

If you are just starting an LLC, we recommend you read our Six Step LLC Formula eBook to help reduce the likelihood of personal liability and you should ensure the lease contract obligations only apply to the LLC entity. A lease contract is one transaction where it makes sense to hire a lawyer because they generally are a longer term contract and a relatively significant obligation.

If your LLC is already in an arrangement and is facing issue with the landlord, you should seek the advice of a lawyer to determine the possibility or likelihood of any potential member claims based on your situation. As noted, the answer really depends on specific facts and circumstances such as the specific provisions of the contract, whether the LLC member has done anything outside of the contract, and how the LLC has been operated and maintained.

You can minimize risk of personal member liability by following certain rules when conducting business and maintaining sufficient LLC governance formalities including executing proper LLC governance forms.

The state legislatures wanted to make forming and operating a limited liability company an easy and straightforward process for small business owners.  As a result, in the LLC Acts of most states, there are no legally required governance documentation requirements that are required to maintain the good standing of an LLC. There may be annual reporting or filings required to be made to the state.

However, LLC governance and LLC paperwork is practically an essential element of an LLC business.  This is because the limited liability company only exists on paper and in accordance with legal laws which are all based on written provisions.  So, in order to determine the personality of the business and, more importantly, its history and processes, such evidence must be in LLC documentation.

Having a complete set of LLC governance paperwork provides the operating history of a business and proof of authorized transactions and business decisions.  This important operational process also wards off potential misunderstandings and disputes among business owners and managers.  Recollections fade as time goes by.  So, you are protecting yourself and your business from potentially expensive he said, she said disputes later by documenting what agreements and decisions are made.

Paperwork and documentation does not have to be complicated and can be done by the business owners or managers for most all routine operational matters.  Visit the LLC Governance section of The LLC Expert for more details on meeting this important requirement for your limited liability company.

VIDEO BLOG POST:

Click below to watch a video we recently made that outlines the major benefits of an LLC for operating a small business.  The limited liability company is not the most common choice for small business owners precisely because it was designed to offer them most benefits for small businesses.  Watch Now!

Once your limited liability company is formed and an LLC Operating Agreement is adopted that provides the LLC with members and a governance structure, then what is required for the LLC to start acting like a business?

GENERAL AUTHORIZATION

The limited liability company can only act through its members, managers and/or officers.  The LLC Operating Agreement should provide who has the authority to act on behalf of the limited liability company.  In the more simple member managed LLC structures, the members themselves have the authority to act on behalf of the LLC and are the agents of the LLC businesss when conducting business activity.

It is also common for a limited liability company to have operating officers such as a president, vice president, treasurer/CFO, and secretary.  Each of these officer positions are given authority with respect to its title.  An LLC can also hire employees and grant employees certain authority and responsibilities that can include acting on behalf of and binding the limited liability company.

SPECIAL ACTIONS USUALLY REQUIRE A MEMBER VOTE

It is not practical to require that every LLC action or decision be brought to the Members for an official vote of approval.  Accordingly, for day to day operational matters, the managing members, managers and/or officers make such decisions. 

However, it is often recommended that the agents of the LLC should not be able to make certain major decisions for an LLC without a proper and formal LLC member vote.  These decisions are generally listed out in the LLC Operating Agreement and subject to a specific rule that requires the approval of Members holding a certain percentage ownership of the limited liability company.

Common examples of such decisions include borrowing money, entering into transactions with a Member, selling all of substantially all of the assets of the LLC, entering into any major purchases of assets, and entering into a strategic transaction.

With some limited liability companies, only a majority vote will be required to approve while in others a higher vote or a unanimous vote is required. Each limited liability company has the flexibility to determine its own set of rules for how the LLC will operate in business, who can properly act on behalf of the limited liability company and when prior member or manager approvals are needed.