Limited liability companies (LLCs) are entities unto themselves, separate from the members that comprise them. Because of that, it’s imperative that members not mix their personal assets with those of the business, either by freely using business assets in a personal capacity, or by lending their own personal assets for business use.
Similarly, it’s important that the financial statements and other records from the LLC show independence as well. And any business dealings must be done strictly on behalf of the LLC as well. For example, a member of an LLC cannot do business on behalf of the LLC but give out his or her personal business card or write a personal check.
Why is this important?
Individual members of an LLC are not personally liable for the debts of the LLC. However, sometimes creditors will pursue an LLC for a liability, and will attempt to collect from individual members anyway. One of the tactics they use is to point to evidence that members intermingled personal assets with those of the LLC, thus compromising the integrity of the corporate shield. If creditors are successful in showing the existence of comingled personal and business assets, they may be successful in holding individual members responsible for business liabilities.
What to do when there’s a problem
If your LLC is facing issues related to a creditor, it’s important to consult with an experienced business law attorney who can protect the LLC and rights of the individual members from behind held personally liable for business concerns.