LLC Members--- What if one LLC member apply for the business credit card and max it out for personal use?
1) One member wants to apply for a business credit card (BCC).
Situation: What if the member uses the BCC for personal use and never pay it back. Is the other LLC member will be personally liable for the debt on the BCC.? Or the BCC company can come after the LLC revenue/profits?
Please expalin as much detail as possible
Thanks very much.
Answer:
No, the other partner is not held responsible. Thats one of the nice things about an LLC as compared to incorporating. Say one of the partners embezzels every dollar from the company and then runs off with it. The other partner is not held responsible, but the company as a whole is.
If the BCC is maxed out for personal use you should do the following:
1. contact the CC company and get a copy of the statement with all purchases for your records.
2. Call all three credit reporting agencies (Experian, Trans Union and Equifax). Put a 90 day fraud alert on your SS # so that your credit doesnt get screwed up because of someone elses problem.
3.Contact a lawyer to gain full control of company.
Good Luck.
Members are not tipically liable for the debt of an LLC. However, you may be in trouble once you get to tax time.
If the credit card is issued in the name of the LLC, then (all member of) the LLC is responsible for all charges made on the card.
Business finances concerning members within an LLC can be a sticky business. For a decend primer on business credit, check-out this website.
http://www.creditmanagementworld.com.
There's a member's section that discusses business bankruptcy and goes into some details about LLCs and bankruptcy.
This is a common problem in business with more tahn 1 member. The operating agmt should spell out how debt can be incureed on behalf or in the name of the company. e.g. can provide that at least one other memebr if not all must consent. If that is teh case, then any debt made on behalf or in the name of the company w/out the authorization of at least 1, 2 or all of the members becomes the responsbility of that member only.
Otherwise, the debt becomes liability of the business to be paid from the business unless the use of the card is for personal use only.
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