Q: My partner and I own and operate several LLCs (limited liability companies) for which we are the only owners. We formed these LLCs, in part, to protect our personal assets from the debts and obligations arising from our business activities. The administrative work in following necessary corporate formalities of the LLCs is turning out to be quite burdensome. Are we, in fact, protected from all liabilities and debts of our LLCs?
A: Generally speaking, LLC members (owners) and managers are not liable for the debts or obligations of the LLC. The law views the LLC and its owners as separate legal entities, and New Hampshire’s LLC statute explicitly exempts members and managers from personal liability for an LLC’s debts and obligations, whether they arise out of contract, tort (for example, negligence), or otherwise.
There are also circumstances under which courts will “pierce the corporate veil” to assign individual liability to corporate owners. Though the New Hampshire Supreme Court has never considered the issue, it would likely pierce the veil under the same circumstances as permitted for corporations – generally, if the LLC has been used to promote an “injustice or fraud.” While there is no bright-line rule for determining when a member or manager may be held personally liable for corporate debts, factors considered by courts in New Hampshire and Massachusetts have included: disregard for corporate formalities; absence of corporate records; insufficient capitalization at the time of incorporation; and common ownership and pervasive control of multiple entities.