Liability of the LLC, Members, and Managers
California LLC Act
Liability of the LLC, Members, and Managers
September 2, 2026 · R|R Insights · CA Business Law Brief
Core Concept
One of the foundational protections of the California LLC form is the liability shield: members and managers are generally not personally liable for the debts, obligations, or liabilities of the LLC solely by reason of being a member or acting as a manager (Cal. Corp. Code § 17703.04). This shield mirrors the corporate veil concept and is a primary driver for choosing the LLC form.
The LLC itself, as a separate legal entity, is fully liable for its own obligations. Members’ exposure is limited to their capital contributions and the value of their membership interests. Managers of a manager-managed LLC likewise enjoy the shield, provided they do not personally guarantee obligations or commit wrongful acts in their own name.
The shield can be pierced under the same alter ego doctrines applicable to corporations: failure to maintain separateness, commingling of funds, undercapitalization, or use of the LLC as a fraudulent device can expose members to personal liability. California courts apply a two-prong test: unity of interest and inequitable result if the shield is not pierced.
Key Rules
| Members not liable for LLC debts | Managers not liable by role alone |
| A member is not personally liable for LLC obligations solely by being a member (§ 17703.04(a)). | Acting as a manager does not create personal liability for LLC obligations (§ 17703.04(b)). |
| Personal guarantees bind individually | Alter ego doctrine applies |
| If a member or manager personally guarantees an LLC debt, that guarantee is enforceable against them individually. | Courts may pierce the LLC veil if there is unity of interest plus inequitable result—same standard as corporate piercing. |
| Wrongful acts are personal | Series LLCs: each cell shielded |
| A member or manager who commits a tort or fraud in connection with LLC business can be personally liable for that act. | In a California Series LLC, each series has its own liability shield from other series (§ 17713.08). |
Applies / Does Not Apply
| ✓ Applies When | ✗ Does Not Apply When |
| Member’s personal assets protected from judgment creditor of LLC | Member who signed personal guaranty for LLC’s bank loan |
| Manager’s personal accounts cannot be garnished for LLC trade debt | Manager who committed fraud on behalf of LLC (personal liability for the tort) |
| Investor’s maximum loss capped at LLC investment | Undercapitalized LLC used to defraud creditors (alter ego) |
In Practice
| Transactional | Litigation |
| Always form a properly capitalized LLC with a written operating agreement, separate bank accounts, and annual minutes to rebut alter ego claims. Advise clients never to sign contracts in their personal name when acting for the LLC—signature block should read ‘John Doe, Member/Manager of XYZ, LLC.’ | In commercial litigation against an LLC, investigate the alter ego factors early: were bank accounts commingled? Was the LLC observing its own operating agreement? Was it adequately capitalized for the risks it undertook? These facts support or defeat a personal-liability cross-claim. |
This brief is for informational purposes only and does not constitute legal advice. For counsel on specific matters, consult qualified legal counsel. © 2026 Reden | Riddell LLP.