{"id":4033,"date":"2011-11-04T08:55:02","date_gmt":"2011-11-04T15:55:02","guid":{"rendered":"http:\/\/www.keytlaw.com\/azllclaw\/?p=4033"},"modified":"2017-02-26T08:53:41","modified_gmt":"2017-02-26T15:53:41","slug":"member-liable-for-llcs-debt","status":"publish","type":"post","link":"https:\/\/www.keytlaw.com\/azllclaw\/2011\/11\/member-liable-for-llcs-debt\/","title":{"rendered":"Court Finds LLC Member Liable for LLC’s Debt because Member Did Not Sign Contract Correctly"},"content":{"rendered":"

If you are the manager of an Arizona manager managed LLC or a member of an Arizona member managed LLC, do you know how to sign contracts on behalf of the LLC?\u00a0 If not, your ignorance could cost you big bucks.\u00a0 The recent Pennsylvania case of Hazer v. Zabala<\/a><\/em>, 26 A.3d 1166, 2011 Pa. Super., found that the member of a PA LLC was liable for amounts owed on a lease because the member did not properly sign the lease on behalf of the LLC.\u00a0 This case is an important lesson for every LLC member and manager.<\/p>\n

I have said many times that people who form Arizona limited\u00a0 liability companies mistakenly believe that once they file the LLC’s Articles of Organization they are automatically protected from the debts and obligations of the LLC.\u00a0 The primary reason people form an LLC is to shield themselves from the LLC’s activities and liabilities.\u00a0 Unfortunately, owner protection is not automatic.\u00a0 There are any number of ways that a member or manager of an LLC can become liable for the LLC’s debts.\u00a0 For members and managers of an Arizona LLC to obtain the protection from liabilities offered by Arizona’s LLC laws, they must operate the LLC in compliance with applicable LLC law.\u00a0 Most people who form an Arizona LLC do not know what Arizona LLC law is and therefore frequently cause the LLC to engage in activity that violates Arizona LLC and creates a risk that the members and managers could be found liable for the LLC’s debts.<\/p>\n

It goes without saying that it is not likely your LLC will comply with Arizona LLC law if you do not know what the law is.\u00a0 The primary reason I wrote my 170 page book called the “Arizona LLC Operations Manual<\/a>” is I want to inform Arizona LLC members and managers about Arizona LLC law so they can cause their LLC to comply with the law.\u00a0 One important and fundamental aspect of Arizona law is exactly how should a contract be worded so that the LLC rather than a member or manager is liable under the contract?\u00a0 My Quick Start Guide has sample signature blocks that illustrate exactly how the signature of the LLC should appear in a contract.<\/p>\n

Facts in Hazer v. Zabala<\/h3>\n

The case involved a lease that was signed by a member of Zabala Broker, LLC.\u00a0 The member, Juan Zabala, signed his name on the lease and underneath is signature he printed \u201cDBA\/ZABALA BROKER, LLC.\u201d\u00a0 The court ruled that Mr. Zabala was personally liable on the lease because he signed it in his name, not as the member or manager of his LLC.<\/p>\n

For the signer to avoid personal liability and for the LLC to be the party liable on the lease the contract should have designated the LLC as follows:<\/p>\n

\n

The first paragraph of the lease (or any contract) should have read:<\/p>\n

Zabala, Broker, LLC, a Pennsylvania limited liability company<\/p>\n

The signature block as the end of the lease (or any contract) should have read:<\/p>\n

Example 1<\/strong>: For a member managed LLC:<\/p>\n

Zabala, Broker, LLC, a Pennsylvania limited liability company<\/p>\n

By: _______________________________
\nJuan Zabala, member<\/p>\n

Example 2<\/strong>: For a manager managed LLC:<\/p>\n

Zabala, Broker, LLC, a Pennsylvania limited liability company<\/p>\n

By: _______________________________
\nJuan Zabala, manager<\/p>\n<\/blockquote>\n

Members and managers must know how to designate their LLC properly in contracts because they may become personally liable\u00a0 on the contract if it is not worded correctly.<\/p>\n

How to Purchase the Ebook Version of the Arizona LLC Operations Manual
\n<\/strong><\/p>\n

Click here to purchase the eBook version of our Arizona LLC Operations Manual<\/a> from our internet store for the incredibly low price of $97.<\/p>\n","protected":false},"excerpt":{"rendered":"

If you are the manager of an Arizona manager managed LLC or a member of an Arizona member managed LLC, do you know how to sign contracts on behalf of the LLC?\u00a0 If not, your ignorance could cost you big bucks.\u00a0 The recent Pennsylvania case of Hazer v. Zabala, 26 A.3d 1166, 2011 Pa. Super., found that the member of a PA LLC was liable for amounts owed on a lease because the member did not properly sign the lease on behalf of the LLC.\u00a0 This case is an important lesson for every LLC member and manager. I have said many times that people who form Arizona limited\u00a0 liability companies mistakenly believe that once they file the LLC’s Articles of Organization they are automatically protected from the debts and obligations of the LLC.\u00a0 The primary reason people form an LLC is to shield themselves from the LLC’s activities and liabilities.\u00a0 Unfortunately, owner protection is not automatic.\u00a0 There are any number of ways that a member or manager of an LLC can become liable for the LLC’s debts.\u00a0 For members and managers of an Arizona LLC to obtain the protection from liabilities offered by Arizona’s LLC laws, they must operate the LLC in compliance with applicable LLC law.\u00a0 Most people who form an Arizona LLC do not know what Arizona LLC law is and therefore frequently cause the LLC to engage in activity that violates Arizona LLC and creates a risk that the members and managers could be found liable for the LLC’s debts. It goes without saying that it is not likely your LLC will comply with Arizona LLC law if you do not know what the law is.\u00a0 The primary reason I wrote my […]<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[31,6,37,11],"tags":[],"class_list":["post-4033","post","type-post","status-publish","format-standard","hentry","category-asset-protection","category-lawsuits","category-operating-llcs","category-why-llc"],"yoast_head":"\nCourt Finds LLC Member Liable for LLC's Debt because Member Did Not Sign Contract Correctly<\/title>\n<meta name=\"description\" content=\"Learn why a Pennsylvania court found the member of a limited liability company personally liable when he improperly signed a lease.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" 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