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ARTICLE · 03 JULY 2018

LLC: When Does It Not Protect Your Personal Assets?

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Limited liability companies (LLCs) are common ways for real estate owners and developers to hold title to property. Their popularity is due, in part, to the fact that LLCs limit members' personal liability.

United StatesReal Estate and Construction
Tanya Gierut, CPA
Tanya Gierut, CPA
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Limited liability companies (LLCs) are common ways for real estate owners and developers to hold title to property. Their popularity is due, in part, to the fact that LLCs limit members' personal liability. In other words, only an LLC member's equity investment is usually at risk, not his or her personal assets. However, this does not mean personal liability never exists for the LLC's debts and liabilities. Below are some of the exceptions that may risk an owner's or developer's personal finances.

Making personal guarantees and contracts

If an LLC member personally guarantees the company's debts or obligations, they will be held liable for the LLC's default on that debt. This is more common they one might think. Many LLC members enter into contracts or financing agreements on the LLC's behalf before the LLC legally comes into existence, if the other party insists on some guarantee.

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