Limited liability company LLC

An LLC is a separate legal person. It contracts, owes, sues and is sued in its own name, and its members are not personally liable for its obligations by operation of law. That is the default rule, and it holds for trade debt, for tort claims and for any obligation nobody personally backed.

Where the shield does not reach

• Anything you guaranteed. A personal guaranty is a voluntary, contractual exception. The LLC protects you from the debts you did not sign for
• Trust fund taxes. Withheld payroll taxes can be assessed personally against responsible persons regardless of entity form
• Your own tortious conduct, including fraud and misrepresentation in obtaining funding
• Veil piercing. Where the entity is a formality — no separate accounts, personal expenses paid from the business, no records, undercapitalisation at formation — a court may disregard it. The standards and the weight given to each factor vary by state

Charging orders

A creditor of a member — not of the LLC — generally cannot seize the membership interest or force a distribution. The usual remedy is a charging order attaching distributions if and when they are made. Protections are stronger in some states than others, and weaker for single-member LLCs in several jurisdictions.

In funding

Entity form affects almost nothing about whether you get funded or what it costs. Underwriters look at cash flow, deposits and the guarantor. Where form matters is filing: the UCC-1 must name the exact registered legal name, and the guaranty must be signed by the individual personally rather than in a representative capacity.