As an Owner, Am I Liable for the Debts of my Iowa Limited Liability Company?

Iowa LLC Umbrella of Protection
Member Protections Under Iowa’s LLC Umbrella

Just as shareholders in Iowa corporations are, by default, generally not liable for the debts and liabilities of their corporation, members (a.k.a. owners) in Iowa limited liability companies are also generally not liable for the debts and liabilities of their companies (see this article for more information about protections provided to shareholders in Iowa corporations).  Put another way, the “limited,” in limited liability company (L.L.C.) actually means something and conveys just what Iowa law provides: limited liability for members.

Iowa black letter law provides that members in an Iowa limited liability company enjoy limited liability and, by default, are generally not liable for the debts, obligations, or other liabilities of an Iowa LLC:

For debts, obligations, or other liabilities of a limited liability company, whether arising in contract, tort, or otherwise all of the following apply:

a.  They are solely the debts, obligations, or other liabilities of the company.

b.  They do not become the debts, obligations, or other liabilities of a member or manager solely by reason of the member acting as a member or manager acting as a manager.

Iowa Code Section 489.304 (emphasis added).  The protections reproduced above are often referred to as a “shield of liability” or the “corporate veil.”  These important liability protections often serve as a fundamental reason that entrepreneurs and business owners alike decide to create legal entities (companies and corporations) in the first place – to limit personal liability.  Comparatively, if entrepreneurs and business owners decided to proceed on their own without creating and operating under a formal entity such as an Iowa LLC, a much greater risk of personal liability exists for any debts, obligations, and actions.  It is important to note, while the provisions reproduced above certainly create legal protections and will provide comfort to many members in Iowa limited liability companies, as with many legal principles, the protection is not absolute and instances exist in which Iowa courts will recognize limited liability and the legal protections, but nonetheless “pierce the corporate veil” and hold members and managers in Iowa companies liable.  To read more about piercing the corporate veil, click here.

If you have questions about whether you or someone you know may be personally liable or potentially liable for the acts, debts, or other liabilities of an Iowa limited liability company or you are seeking to obtain protections under Iowa’s LLC umbrella of protection, you should consider contacting a corporate dispute attorney.

LEGAL DISCLAIMER AND TERMS OF USE

Innovative Litigation, L.L.C., as owner and host of this site, and Matthew McKinney as the author (acting on behalf of and through Innovative Litigation, L.L.C.) cannot and does not warrant the accuracy or reliability of the information presented on or through this site.  The law can and does change over time and the information contained herein may not reflect the most recent laws – whether statutory law, administrative law, case law, constitutional law, or otherwise.  The information on this website does not constitute legal advice and readers should not rely on it to solve problems or other matters.  Further, you should seek licensed counsel in the appropriate legal jurisdiction before taking any action.  Any information provided on this site is presented “As Is” for your personal curiosity and enjoyment.  It is not meant to be relied upon for legal advice, counsel, or for any other purposes.  Such information does not take the place of a lawyer.  Rules and laws differ by jurisdiction and the information contained within this website may not apply in your jurisdiction.  The appearance of articles, listings, or ads, by or for professionals, on this site, does not constitute an endorsement.  In all cases, you are responsible for determining the quality of services, information, and/or advice provided by professionals through, or as a consequence of, your use of this site.  Neither liability nor responsibility shall arise to any person or entity with respect to loss or damage caused (or alleged to be caused), directly or indirectly, by information posted on this website, or by reason of contact with a professional listed on, or posting information to, this site.  No attorney-client relationship is formed by viewing this website and practice is limited to jurisdiction where lawyers are admitted.  The information furnished on the website is only general and not a substitute for personalized legal advice.   Legal advice cannot be given without full consideration of all relevant information relating to the individual(s) situation.  Laws can change daily and new laws may, and likely will, affect the accuracy of the information herein.  The information herein may be outdated and replaced by new law.

If you are seeking representation, please read the following notice before sending an e-mail:

Sending an e-mail will not make you a client.  Until an agreement regarding representation is reached with you, anything you send will not be confidential or privileged.  Before representation can occur, a lawyer will first take you through the conflict of interest procedure and see that you are put in touch with the lawyer best suited to handle your matter.

If you proceed with an e-mail, you confirm that you have read and understood this notice.

Advertisements

About Matthew McKinney

Attorney focused on civil and commercial litigation.
This entry was posted in Business Owner, Intra-corporate dispute, Litigation, Manager, Member and tagged , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s