What Liability Protection Does an LLC Member Actually Get?

One of the biggest reasons entrepreneurs form a limited liability company (LLC) is right there in the name: limited liability. But what does that actually mean in practice? Let’s break down what kind of protection an LLC provides—and where that protection ends.

1. The Core Shield: Separation Between Personal and Business Assets

At its most fundamental level, an LLC creates a legal barrier between you (the member) and the business. This means that if your company gets sued or incurs debts, your personal assets—such as your home, car, or personal bank account—are generally off-limits to creditors.

In Texas and most other states, this protection applies as long as:

• The LLC is properly formed and registered.
• You maintain separation between personal and business finances.
• You don’t personally guarantee business debts or obligations.

If a contractor sues your LLC for unpaid invoices, they can reach the company’s bank account, but not your personal one.

2. When the Shield Doesn’t Hold: Piercing the Veil

Courts can sometimes “pierce the corporate veil,” meaning they disregard the LLC’s separate legal identity. This typically happens if:

• You commingle personal and business funds.
• The LLC is undercapitalized or used as a sham to defraud creditors.
• You personally commit wrongdoing (e.g., fraud or negligent acts).
• You fail to follow basic formalities, like keeping records or maintaining a registered agent.

In those cases, your personal assets can be exposed—so the protection isn’t absolute.

3. Protection From Business Debts, Not From Personal Wrongs

An LLC doesn’t protect you from your own torts or negligence. If you, as a member, personally injure someone, commit malpractice, or commit fraud, you’re personally liable for those acts. The LLC might also be liable, but your personal exposure remains.

For example, a construction LLC might protect you from contract-based debts or employee claims, but not from personal negligenceat a job site.

4. Charging Orders: Protecting the LLC From Your Personal Debts

Interestingly, the protection runs both ways. If youpersonally owe someone money, your creditors can’t seize LLC assets. Instead, they may get a charging order—a right to receive your share of distributions, if any, but not to control or liquidate the business.

This keeps your LLC’s operations intact even if you face personal financial trouble.

5. Multiple Members and Layered Protection

In multi-member LLCs, liability protection can be even stronger because courts are less likely to disregard separate existence. Many business owners also use multi-entity structures (for example, one LLC owns assets, another runs operations) to add layers of protection and isolate risk.

Key Takeaway

An LLC gives powerful protection against business liabilities—but only if you treat it like a real business. That means:

• Keeping business and personal finances separate.
• Using written contracts under the LLC’s name.
• Maintaining records and adequate capitalization.
• Avoiding personal guarantees wherever possible.

The “limited liability” in an LLC isn’t a magic force field—it’s a legal structure that works as well as you maintain it.

At David C. Barsalou, Attorney at Law, PLLC, we help clients navigate business, family, tax, estate planning, and real estate matters ranging from document drafting to litigation with clarity and confidence. If you’d like guidance on your situation, schedule a consultation today. Call us at (713) 397-4678, email barsalou.law@gmail.com, or reach us through our Contact Page. We’re here to help you take the next step.