personal liability of llc going under

by David
(NJ)

What are my legal rights if my business is failing and I owe advertising expenses? Can they attack my personal credit and can I be held liable with no income?

Answer

Whether you are personally liable for your LLC's debts, including an advertising contract, depends on the contract itself.

Who are the parties to the contract--the LLC or you personally?

Did you sign the contract as "David, Member XYZ, LLC" or did you sign it personally (or is it ambiguous whether you signed it personally or on behalf of the LLC?)

Did you personally guarantee the LLC's performance of the contract? (This is unusual for typical business purchases, but more common when a bank is lending money to an LLC and when the LLC is entering a lease).

As to the second part of your question, can you be held liable and what if you have no income.

You can be personally liable if you personally agreed to pay the charges (see above). In order to enforce that liability, they must sue you, prove their case and get a judgment.

In order to collect on that judgment, they need to find assets of yours. If you have no assets and no income, the judgment will be difficult to collect. If you declare bankruptcy, the judgment will be eliminated after the discharge (they may receive some return on their debt, depending on what happens in bankruptcy).

If you have been sued personally, see an attorney. It's possible that they have no claim against you and it can be dismissed.

If they have reported this debt to credit agencies on your personal credit, and yet you are not personally liable, you need to contact the credit agencies and have them correct your report.

Don't know how to go about correcting bad information on your credit report?

This course, 37 Days to Clean Credit, gives some great advice about how to fix misinformation on credit reports, and is reasonably priced at $37.

The sales page has a lot of highlighting and exclamation points, but don't let that turn you off. Correcting misinformation in credit reports is a powerful, particularly for an owner of a failed LLC who is likely to have misinformation on their report due to former vendors of the company attacking the personal credit of the business owner.

Whether these vendors are vindictive or simply uninformed, any damage done needs to be fixed.