WATCH YOUR LANGUAGE WHEN SIGNING A PERSONAL GUARANTEE
FOR A LIMITED LIABILITY COMPANY
  
December, 2017

Lenders, landlords and other creditors often require a personal guaranty from LLC members.  A personal guarantee acts to bind LLC members to personal liability for the obligations of the LLC.  The language in the guaranty matters!

WATCH HOW YOU SIGN

Signing your name followed by your business title (“president” or “manager”) does not negate your personal liability.  You may be able to negate personal liability by using “by,” “per,” or “on behalf of” with the name of the LLC. 

READ CAREFULLY – YOUR PERSONAL GUARANTY MAY LIVE BEYOND A SINGLE TRANSACTION

Phrases such as “now or at any time hereafter” or “all obligations incurred” or “now existing or hereafter contracted” may create a continuous personal guaranty of future transactions by the LLC with the creditor.

CREDITORS MAY BE WILLING TO NEGOTIATE THE TERMS OF THE PERSONAL GUARANTY

Consider proposing elimination of the guaranty when certain conditions are met.  For example, ask for a dollar amount cap on the guaranty or set a period of time for the guaranty or limit the guaranty to certain assets.