Can Business Creditors Come After Me Personally in Florida?

Quick answer: Usually not. Under Florida's LLC statute, an LLC's debts belong to the company, and a member or manager is not personally liable for them solely because of that role; failing to observe formalities is not a ground for imposing liability. A creditor can still reach you personally if you signed a personal guarantee, signed in your own name, personally committed the wrongful act, received a distribution the company could not lawfully make, owe certain taxes the business collected, or if a court disregards the LLC because it was used for improper conduct.

Related practice: LLC and corporation formation · Outside general counsel · Business litigation

Most Florida owners form an LLC or corporation so a business failure does not take their home and savings with it. That protection is real, but it has limits, and most of them come from choices the owner made.

In this guide

• The general rule
• When a creditor can come after you personally
• Personal guarantees
• Piercing the LLC "veil"
• Distributions and taxes
• Your personal creditors and your LLC interest
• What to do if a creditor names you personally
• How owners reduce the risk
• Frequently asked questions

The General Rule

A Florida LLC is a separate legal person. Its contracts, debts and judgments are the company's. Section 605.0304 of the Florida Statutes provides that a member or manager is not personally liable for the company's debts, obligations or liabilities solely by reason of being or acting as a member or manager, and that failing to observe formalities is not a ground for imposing that liability. Corporations offer shareholders comparable protection, subject to similar exceptions.

When a Creditor Can Come After You Personally

The protection covers liability that comes only from being an owner. It does not protect you from obligations you took on yourself. The common situations:

• You signed a personal guarantee for a loan, lease, credit line or supplier account.
• You signed in your own name, or without making clear you signed for the company.
• You personally caused the harm, for example through fraud, misrepresentation or your own negligence. The LLC does not shield an owner from liability for the owner's own conduct.
• A court disregards the LLC because it was used for an improper purpose (below).
• You received an improper distribution while the company could not pay its debts (below).
• Collected taxes were not paid over, such as sales tax or payroll withholding (below).

Personal Guarantees

Banks, landlords and many suppliers ask small-business owners to guarantee the company's obligations. A guarantee is your own promise, separate from the LLC, so the creditor can pursue you directly under its terms. Forming an LLC does not undo a guarantee, and leaving or closing the company usually does not end it unless the creditor releases you. Keep a list of every guarantee you have signed.

Piercing the LLC "Veil"

Florida courts can disregard a company's separate existence, but the bar is high. The Florida Supreme Court has held that a corporate veil will not be pierced without proof of improper conduct, meaning the company was organized or used to mislead creditors or to perpetrate a fraud on them. Facts courts look at include using the company as a personal account, moving money out to avoid creditors, and treating the company's assets as your own. Undercapitalization or informal record-keeping alone usually is not enough, but they become part of the story when misconduct is alleged.

Distributions and Taxes

Improper distributions. An LLC may not make a distribution if, afterward, it could not pay its debts as they come due or its liabilities would exceed its assets. A member who knowingly receives a distribution that violates that rule can be liable to the company for the improper amount.

Sales tax. Florida treats sales tax a business collects as state money. A person responsible for collecting and paying it who willfully fails to do so can be personally liable for a penalty equal to twice the unpaid tax.

Payroll taxes. Federal law can impose a penalty equal to the unpaid amount on a responsible person who willfully fails to pay over income and employment taxes withheld from employees' wages.

Your Personal Creditors and Your LLC Interest

The question can also run the other way: a creditor of yours personally may try to reach your LLC interest. For a multi-member LLC, Florida generally limits that creditor to a charging order, which gives the creditor a right to distributions you would receive, not control of the company. For a single-member LLC, a court can order more in some circumstances.

What to Do If a Creditor Names You Personally

1. Read the demand or complaint carefully. Note whether it names you, the company, or both, and on what theory.
2. Find every document you signed: guarantees, credit applications, leases and loan papers.
3. If you were served with a lawsuit, calendar the deadline now. See Served With a Florida Lawsuit? The First 20 Days.
4. Do not move money or assets out of the company or your own name in response. Transfers after a claim arises can create new problems.
5. Get legal advice on whether the claim against you personally has a basis.

How Owners Reduce the Risk

• Keep separate bank accounts and never pay personal expenses from the company's account.
• Sign every contract in the company's exact Sunbiz name, with your title.
• Keep the company's annual report current on Sunbiz.
• Capitalize and insure the business for its real risks.
• Negotiate guarantee limits, caps or burn-off dates, and track them.
• Do not take distributions when the company cannot pay its bills.

See also Protecting Your Personal Finances from Business Liabilities.

Frequently Asked Questions

Can a creditor take my house for my LLC's debt?

Not for a debt that belongs only to the LLC. If you personally guaranteed the debt, or a court finds a basis for personal liability, the creditor can pursue your personal assets subject to Florida's exemptions, including the homestead protection.

Does a single-member LLC protect me?

A single-member LLC can protect you from the company's debts under the same rules. The main differences concern your personal creditors reaching your interest, and how carefully the company's money is kept separate from yours.

I signed a personal guarantee. Does closing the LLC end it?

Usually not. A guarantee generally survives the company's dissolution unless the creditor releases you or the guarantee says otherwise.

Can a vendor sue me personally just because I am the owner?

A vendor can name you, but ownership alone is not a basis for liability. The question is whether you guaranteed the account, signed personally, or did something that creates liability on your own.

Does failing to hold meetings or keep minutes expose me?

Not by itself. Florida's LLC statute says failure to observe formalities is not a ground for personal liability. Good records still help you show the company was run as a separate business.

Related Reading

• How Does an LLC Protect Member Assets?
• What Are the Options When a Partner Chooses to Leave a Business?

About the author. Gavin T. Elliot, Esq. is the Founder and Senior Managing Attorney of The Elliot Legal Group, P.A. in Fort Lauderdale, where the firm handles business law and business litigation for Florida companies and their owners. Read Gavin's profile.

Talk to the Firm About Business Liability

The Elliot Legal Group, P.A. advises Florida business owners from its office at 115 NE 3rd Avenue, Suite 707, Fort Lauderdale. Request an Initial Case Assessment or call (754) 332-2101. The first call is with Jenny Elliot, who is not an attorney, and does not include legal advice or document review. The team confirms any attorney consultation fee, scope and payment arrangements before booking.

General information, not legal advice. Reading this article or contacting the firm does not create an attorney-client relationship.