Usually not. In Florida, a company’s debts belong to the company, so a director is not personally liable for them just because the director holds the title. Personal exposure can still arise in specific situations. This guide covers the main ones so you can understand what a creditor may be claiming.
The company’s debts generally stay with the company
Its loans, contracts and vendor invoices are generally the company’s obligations, not the obligations of the people who run it. Florida’s LLC law says a debt of an LLC is solely the company’s, and a member or manager is not personally liable for it just because of that role, Fla. Stat. § 605.0304. Failing to follow company formalities is not, by itself, a ground for that liability either.
Being a member or manager of an LLC does not, by itself, make you liable for the company’s unpaid bills, Fla. Stat. § 605.0304. The exceptions below are where personal exposure usually comes from. Whether one of them applies turns on the documents you signed and what you personally did. For the broader picture, see our business litigation overview.
When a director signs a personal promise to pay
The most common route is a personal promise to pay the company’s debt if the company does not pay.
Florida law generally bars an action on a special promise to answer for another person’s debt, default or miscarriage unless the agreement, or a note or memorandum of it, is in writing and signed by the party to be charged or by some other person lawfully authorized by him or her. A spoken assurance alone generally cannot support that kind of lawsuit. The signed writing is the key checkpoint.
Read the signature block closely. A signature that shows only the company’s name and your title points to a company obligation. A signature that adds your own name to a promise to pay can point to you personally. A creditor may also name an individual on a document even when the company is the main debtor. Read every page you signed, because the words in the document control what you agreed to.
Personal wrongdoing can create personal claims
A director can face a claim for his or her own wrongful conduct, even when the company is also liable. Florida’s corporate statute says a director is not personally liable for money damages for ordinary decisions made as a director. Liability arises only if the director breached a duty and that breach falls within a listed circumstance, such as a violation of criminal law or an improper personal benefit, Fla. Stat. § 607.0831.
In business terms, consider financial statements the owner knew were false and gave to a bank to win a loan. Or consider false statements to a buyer about a company being sold. Claims like these target the person who made the statements, not only the company. Our page on business sale misrepresentation claims covers that area in more detail.
The line to draw is between the company’s debt and your own conduct. An unpaid vendor invoice is usually the company’s problem. A false statement you made to get the invoice paid or the deal closed may be your own problem.
Unpaid payroll and sales taxes: who is responsible
Unpaid payroll taxes and sales tax are a common area where personal exposure arises. Florida’s sales tax statute says dealers collect the tax from the purchaser or consumer, Fla. Stat. § 212.07. Tax that a business collects or withholds is a serious matter when it goes unpaid.
If you handled these duties, keep records showing what was paid, when, and who made the decision.
Unlawful distributions and running an insolvent company
Florida law bars a corporate distribution if, after the payment, the corporation could not pay its debts as they come due, or its total assets would be less than its total liabilities plus (unless the articles of incorporation permit otherwise) the amount needed to satisfy superior preferential shareholder rights on dissolution, but this section does not apply to distributions in liquidation under ss. 607.1401-607.14401, Fla. Stat. § 607.06401.
Under Fla. Stat. § 607.0834, a director who votes for or assents to a distribution made in violation of s. 607.06401, s. 607.1410(1) or the articles of incorporation is personally liable to the corporation for the amount that exceeds what could have been distributed without violating those provisions, if it is established that the director did not perform his or her duties in compliance with s. 607.0830. In any such proceeding, the director has all of the defenses ordinarily available to a director.
LLC members and managers face a parallel rule. A member of a member-managed LLC or a manager of a manager-managed LLC who consents to a distribution made in violation of s. 605.0405, and in consenting fails to comply with s. 605.04091, can be liable to the company for the amount that exceeded what could lawfully have been distributed, Fla. Stat. § 605.0406.
Timing matters. An LLC distribution claim under this rule is barred unless commenced within two years after the distribution, Fla. Stat. § 605.0406. These claims turn on the company’s finances when each payment was made, not only on how the company later performed.
Piercing the corporate veil: when courts disregard the company
Courts look past the company only in narrow cases, usually when an owner used the company to mislead creditors or avoid obligations. The corporation must have been organized or used to mislead creditors or to perpetrate a fraud on them, as quoted in Wurtzebach v. Flooring Depot.
Wurtzebach lists three things a claimant must prove. The shareholder dominated the corporation so it had no independent existence. The corporate form was used fraudulently or for an improper purpose. The claimant was injured as a result.
Expect close attention to how money moved between owners and the company.
Directors, shareholders and LLC members: who carries the risk
Directors and officers run the company day to day. Shareholders or LLC members own it and hold voting rights. Directors and managers generally direct the business. Owners generally are not liable for the company’s ordinary debts because of that ownership.
Florida’s Division of Corporations describes the entities the state recognizes, including corporations and LLCs. That is why entity type matters. A general partner faces different rules than an LLC member.
Even for an LLC, the protection is not a blanket shield. The personal-exposure situations described above still apply. How the entity was formed and how it was run both matter.
Moving assets out of the company: fraudulent transfers
A transfer made to dodge a creditor can be challenged under Florida’s fraudulent transfer law. A transfer can be fraudulent if it was made with actual intent to hinder, delay or defraud a creditor. It can also be fraudulent if the debtor transferred property or incurred an obligation without receiving a reasonably equivalent value in exchange, and either the debtor was engaged or about to engage in a business or transaction for which its remaining assets were unreasonably small in relation to that business or transaction, or the debtor intended to incur, or believed or reasonably should have believed it would incur, debts beyond its ability to pay as they became due, Fla. Stat. § 726.105.
Courts may consider several factors when they look at intent. These include whether the transfer went to an insider, whether the debtor had been sued or threatened with suit before the transfer, and whether the debtor was insolvent around that time.
In business terms, moving equipment, receivables or cash to a related company after a suit is threatened can draw this kind of scrutiny. That challenge can reach the person who received the asset, not only the company.
If a creditor has named you personally: what to do next
You may be a director, a spouse, a partner or a family member reading this on someone else’s behalf. The papers may have arrived without warning. Do not set aside a demand or lawsuit. Response deadlines can be short.
Start by gathering signed agreements, personal promises you may have made in writing, bank statements, meeting minutes, and correspondence with the creditor. Keep originals and do not alter them.
Ayala Law PA focuses on business litigation, commercial and contract disputes, shareholder and partnership disputes, construction and real estate litigation, and international trade disputes in Florida courts and arbitration. The firm’s office is at 1646 W Snow Ave in Tampa, and it represents businesses in Tampa and Hillsborough County. Consultations are a paid service.
Can directors be held personally liable for company debts in Florida?
Generally not, because a company’s debts belong to the company. Personal liability can arise from a personal promise to pay, your own wrongful conduct, or certain unlawful payments or transfers.
Does signing as an officer make you personally liable?
Usually not.
How long do you have to bring an unlawful distribution claim?
For corporations, the claim is barred unless brought within two years of the applicable date, Fla. Stat. § 607.0834. For LLCs, the deadline is two years after the distribution, Fla. Stat. § 605.0406.
Does a promise to pay someone else’s debt have to be in writing?
Florida law generally requires a signed writing for that kind of promise, Fla. Stat. § 725.01.
If a demand has named you, you can reach Eduardo A. Maura, the responsible lawyer, at (305) 570-2208 or through the contact page.
