Hello and thank you for your question.
For the reasons described below, and as long as you did not sign on as
an individual guarantor of the lease or agree to be obligated
personally, you cannot be held personally responsible.
Here is the California statute
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=17001-18000&file=17100-17107
17101. (a) Except as otherwise provided in Section 17254 or in
subdivision (e), no member of a limited liability company shall be
personally liable under any judgment of a court, or in any other
manner, for any debt, obligation, or liability of the limited
liability company, whether that liability or obligation arises in
contract, tort, or otherwise, solely by reason of being a member of
the limited liability company.
(b) A member of a limited liability company shall be subject to
liability under the common law governing alter ego liability, and
shall also be personally liable under a judgment of a court or for
any debt, obligation, or liability of the limited liability company,
whether that liability or obligation arises in contract, tort, or
otherwise, under the same or similar circumstances and to the same
extent as a shareholder of a corporation may be personally liable for
any debt, obligation, or liability of the corporation; except that
the failure to hold meetings of members or managers or the failure to
observe formalities pertaining to the calling or conduct of meetings
shall not be considered a factor tending to establish that a member
or the members have alter ego or personal liability for any debt,
obligation, or liability of the limited liability company where the
articles of organization or operating agreement do not expressly
require the holding of meetings of members or managers.
(c) Nothing in this section shall be construed to affect the
liability of a member of a limited liability company (1) to third
parties for the member's participation in tortious conduct, or (2)
pursuant to the terms of a written guarantee or other contractual
obligation entered into by the member, other than an operating
agreement.
(d) A limited liability company or foreign limited liability
company shall carry insurance or provide an undertaking to the same
extent and in the same amount as is required by any law, rule, or
regulation of this state that would be applicable to the limited
liability company or foreign limited liability company were it a
corporation organized and existing or duly qualified for the
transaction of intrastate business under the General Corporation Law.
(e) Notwithstanding subdivision (a), a member of a limited
liability company may agree to be obligated personally for any or all
of the debts, obligations, and liabilities of the limited liability
company as long as the agreement to be so obligated is set forth in
the articles of organization or in a written operating agreement that
specifically references this subdivision.
I should say something about "alter ego liability." That's a way of
arguing that the LLC was not really an independent legal entity, but
rather just your "alter ego." In the corporate world it's known as
"piercing the corporate veil." California law here is more favorable
to you than in most states, because even if you've been careless in
observing the formalities of the LLC (holding meetings, keeping
minutes, etc.) that can't be used as an excuse to ignore the entity.
For an example of the sort of thing you'd have to do to risk alter ego
liability, here's a description of a Connecticut case that went
against the LLC owner.
http://www.firstam.com/faf/html/cust/jm-piercing.html
Your lease is easily contrasted with this - - signing the lease wasn't
part of some scheme to defraud the landlord, it's just that
unfortunately the LLC's hopes of business success were not realized.
Also, as I explain further below, you're not going to "loot" the LLC
of its assets - - you're going to leave them in the LLC, such as they
are, for the landlord and other creditors to take.
As far as the other exception, in Section 17254, it provides a reason
that you should not dissolve your LLC.
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=17001-18000&file=17250-17255
17254. (a) No distribution shall be made if, after giving effect to
the distribution, either of the following occurs:
(1) The limited liability company would not be able to pay its
debts as they become due in the usual course of business.
(2) The limited liability company's total assets would be less
than the sum of its total liabilities plus, unless the operating
agreement provides otherwise, the amount that would be needed, if the
limited liability company were to be dissolved at the time of the
distribution, to satisfy the preferential rights of other members
upon dissolution that are superior to the rights of the member
receiving the distribution.
In other words, since the liabilities of the LLC at this point are
probably greater than its assets (and the lease obligation is one of
the liabilities), it would be wrong for you to dissolve the LLC since
that would mean you were taking LLC assets and pocketing them. That
would give the landlord and other creditors an excuse to argue that
your personal assets should be attached at least to the extent that
the distribution was wrongful under the statute.
So to avoid any risk of your personal assets being attached, just
leave the LLC in place, owning whatever it owns (and keep making the
necessary filing payments to keep it in good standing).
That's really the whole story - - but do check over the lease papers
and make sure you really didn't sign as guarantor.
Search terms used
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I hope you find this information useful. If you find any of this
unclear, please request clarification. I would appreciate it if you
would hold off on rating my answer until I have a chance to respond.
Sincerely,
Google Answers Researcher
Richard-ga |
