Can a partner have their personal wage garnished for a debt ofan LLC?

I was the major holder in an LLC business that was forclosed on. The collection agency holding one of the debts of that LLC is trying to garnish my wages. Can they collect on that debt?

Asked on October 1, 2011 under Bankruptcy Law, Idaho

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

The whole point of an LLC--a "limited liability company"--is that the members/owners should be  insulated from personal liabilty for business debts. While it may be possible that the wages you draw from the LLC itself can be garnished--you control the LLC as a major holder; therefore, your "wages" may be viewed as LLC assets, and they can possibly keep you from paying yourself when there are debts to other creditors--apart from wages from the LLC, your personal wages (e.g. income from other sources) and assets should be protected, except:

1) to the extent you personally guaranteed debts or obligations; if you did, that guaranty will let those creditors or their collections agencies reach your personal income and assets

2) there are a few debts, like certain tax debts (e.g. payroll tax obligations) for which a responsible member of an LLC can be personally liable even without a guaranty

3) if it can be shown that the LLC is actually a pretense and you have co-mingled your and the LLCs monies, they may be able to "pierce the corporate veil" and reach you personally.

If it's enough money to be worth retaining a lawyer, do so, and let the lawyer help you fight this; if it's not enough to be worth hiring a lawyer, you're probably better off either paying, allowing the garnishment, or trying to settle for some mutually agreeable amount.


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