Legal Question in Bankruptcy in California

Is the sole "officer" of an LLC in California liable for debts incurred by the LLC, i.e. state taxes, employee wages, unpaid vendor bills? Must bankruptcy be filed?

Asked on 6/01/10, 9:17 pm

1 Answer from Attorneys

Mark Storm Law Office of Mark Storm 916-739-8552

An LLC is a separate business entity, similar to a corporation. It may have one or more members. LLC members are typically not personally liable for the debts of the LLC. An exception could made if a creditor can show the LLC (or corporation) is being disregarded by its own member as a separate entity by failing to uphold the formalities of it being a separate entity (e.g., commingling funds, failure to keep meeting minutes, failure to keep separate books and records, etc.). The creditor would normally have to prove the member is disregarding the LLC formalities to "pierce the corporate veil" and hold the individual member personally liable for the LLC's debts as an "alter ego" of the LLC. One of the main purposes for creating a corporation or LLC is to protect the members from personal liability.

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Answered on 6/02/10, 7:44 am

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