Entities

Can someone sue your LLC and take your personal assets?

Yes, in the circumstances below. The filing was never the protection. What you did after it was filed decides whether the separation holds.

The 1787 Group · Updated 2026-08-29 · 8 min read

An LLC separates the company's debts from your personal assets. That is the whole promise, and it is real. It is also conditional, and the condition is the part that gets left out of the sales page.

A court can decide your company is not really separate from you and let a creditor come after your personal property anyway. It has a name: piercing the corporate veil. It is not exotic and it does not require fraud.

What actually causes it

The reasons are mundane, which is exactly why they are common.

• Commingled money. Paying a personal bill from the business account. Running two entities through one account because opening the second was a hassle. Depositing a company cheque into personal savings because it was faster.
• No operating agreement. An LLC without one is a registration and nothing else. There is no written record of who owns what, who decides, or how the company governs itself.
• Ignored formalities. No resolutions, no records, no minutes, decisions nobody documented.
• Undercapitalisation. A company with no assets and no insurance, structured so there was never anything to pay a claim with.

None of that is dramatic. Every item is an administrative shortcut taken by a busy person, and collectively they are what a plaintiff's lawyer builds an argument from.

The filing takes an afternoon. The protection is behaving like the separation is real, and having the documents that show you did.

What the separation requires

Treat these as the floor rather than best practice.

1. Its own bank account. Every dollar in and out of the business moves through it. Owner draws are recorded as draws.
2. A signed operating agreement. Even single-member. Especially single-member, because that is the structure most often argued to be indistinguishable from its owner.
3. Contracts signed in the company's name, in your capacity as a member or manager, never personally.
4. Records that exist. Resolutions for consequential decisions. A written trail for anything a stranger would need to reconstruct.
5. Insurance. Structure decides who can be reached. Insurance pays claims. They are not substitutes and you want both.

Where a trust changes the picture

An LLC answers one question: if the business is sued, can they reach me? A trust answers a different one: if I am sued, what can they reach?

Your membership interest in an LLC is personal property. A judgment against you personally puts that interest in play, whatever the company's own liability shield does. Holding the interest in a trust changes who owns it, which changes what a creditor of yours can reach and how it transfers if something happens to you.

This is why the structure is usually described in layers rather than as a single entity:

• The operating company does the business. It invoices, hires, signs contracts, takes on risk, and deliberately owns as little as possible — so if it is sued, there is not much inside to take.
• The holding company owns things. Other companies, property, equipment, cash. It has no customers and signs no customer contracts, so there is very little reason for anyone to sue it.
• The trust owns the holding company and passes it on without probate.

Risk in one place, value in another. That is the entire design, and it only works if you keep them genuinely separate in practice.

What to check this week

A short audit, honestly answered:

• Does every entity you own have its own bank account, with nothing personal running through it?
• Is there a signed operating agreement you could hand someone today?
• Are your contracts signed in the company name, in your capacity as member or manager?
• Is any titled asset — property, vehicle, equipment — still in your personal name?
• If you were sued personally tomorrow, what would that judgment be able to reach?

If the last question does not have a clear answer, that is the gap. It is fixable, it is administrative, and it is much cheaper to close before anything is pending than after.