When can a member of a closely held LLC be held personally liable for the LLC’s debts? According to the U.S. Bankruptcy Court for the Middle District of Pennsylvania, liability is established when a member deals with creditors personally, without identifying himself or herself as an agent for the LLC.
In the case In re LMcD, LLC, the Trustee for a Chapter 7 bankruptcy estate offered up several theories in an attempt to tag the LLC members with personal liability for certain of the LLC’s debts. The Court, however, rejected each of the arguments advanced by the Trustee and instead seized upon the fact that a member of the LLC did not clearly identify that he was acting as an agent for the LLC when transacting business with several creditors whose debts the LLC sought to avoid in the bankruptcy.
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