Are You Personally Liable for That Business Contract?

When the Corporate Veil Doesn’t Protect You (and How to Stay Safe)

You thought you were protected. After all, you signed as the CEO or owner of the company—not personally.

But now, you’re named in the lawsuit. Personally.

Here’s the truth: just having an LLC or corporation doesn’t make you immune. Under New York and New Jersey law, you can still be held personally liable in certain situations.

🔍 When You *Shouldn’t* Be Liable

In general, if the contract was:

• Signed in the business’s legal name
• Signed by an authorized officer or member
• Within the scope of the business purpose

—then you should not be personally liable. That’s the whole point of a limited liability entity.

⚠️ When You *Can* Be Personally Liable

Courts can hold you personally responsible if you:

• Signed in your own name instead of the company’s
• Signed a personal guaranty — even hidden in the fine print
• Mixed business and personal funds or failed to keep proper records
• Used the company to commit fraud, deceit, or wrongful conduct
• Misrepresented your authority (i.e., signed on behalf of an entity that doesn’t exist)

This is known as “piercing the corporate veil” — and courts don’t hesitate to do it when the facts justify it.

🖊️ What About Guaranties?

Many business owners are shocked to discover they personally guaranteed the deal. Watch out for contract language like:

“The undersigned personally guarantees the obligations of the Company.”

This language is often buried in credit applications, commercial leases, and vendor agreements.

📌 How to Avoid Personal Liability

• Always sign:
  _“ABC Corp, by John Doe, CEO”_ — not just “John Doe”
• Read every clause — especially toward the end of the contract
• Don’t blur the lines between business and personal accounts
• Maintain proper business records and insurance
• Don’t overpromise or act outside your authority

🛡 Can You Defend Against It?

Yes. A skilled attorney can often challenge attempts to pierce the veil or enforce an ambiguous guaranty—but timing matters.

Get legal advice before you respond, agree to anything, or speak to the other side’s attorney.

The Bottom Line

LLCs and corporations can protect you—but only if you use them correctly.

If you’ve been personally named in a business dispute, don’t assume you’re out of options—but don’t wait, either.

Been sued personally over a business deal? Book a 15-minute paid consultation with JDE Law Firm, PLLC today. We’ll assess your risk—and your defense.

🔗 Schedule a Consultation