Legal Question in Business Law in Illinois

Re: Business Partnership

Look at your organization documents with regard to debt.

Re: Business Partnership

You say "We are a Partnership and are LLC." Unless you have two separate entities, your business is EITHER a partnership OR an LLC. It is important to distinguish between the two because they are governed by very different statutes.

Assuming that you are an LLC and had the foresight to adopt an operating agreement, look at your operating agreement first. It should answer your question.

If the operating agreement is silent on the issue, or you have no operating agreement, you have to look to the Illinois Limited Liability Company Act.

There are several general rules that come into play. A member or manager of an LLC acts as agent for the LLC. A member or manager is not personally liable for a debt, obligation, or liability of the LLC solely by reason of being or acting as a member or manager. That would mean that in the absence of any agreement to the contrary, the fact that one member or manager has agreed with a card issuer to be personally liable on a company credit card does NOT automatically make the other members or managers personally liable.

The LLC Act also provides that all or specified members of an LLC are liable in their capacity as members for all or specified debts, obligations, or liabilities of the company if: (1) a provision to that effect is contained in the articles of organization; and (2) a member so liable has consented in writing to the adoption of the provision or to be bound by the provision.

If you don't have an operating agreement, it is highly unlikely that you put a provision in your articles of organization regarding specific debts, but you should check there.

Finally, since an operating agreement does not have to be in writing, it is possible that even in the absence of a formal operating agreement, one member could show that there was an agreement among the members that any personal liability would be shared among them.

I hope this helps.