Does business failure mean bad news for family?

    Dear Dave,
    My father-in-law started a business as an LLC a few years ago. He named all his daughters owners, with him owning the majority share. The business failed, and now he is being sued by creditors. He told the family these creditors can’t come after us and the other siblings because he is the majority owner. Is this true, or should we get a lawyer?
    Caleb
    
    Dear Caleb,
    Your wife is probably not in danger unless she signed paperwork making her liable for a loan or liable with a creditor. If she signed official, legal paperwork — like if she went down to the bank and signed on a loan — then she’s liable. It’s that simple. That would make her, or any of her siblings who did this, co-makers on the loan.
    Your wife, and any of her sisters, who signed on trade accounts taking supplies from a supplier and paying them could also be liable. But they are not automatically liable simply because they were listed as minority owners in an LLC, or even a sub-S corporation. If it were a general partnership, there’s a possibility they could be liable. That’s one of the reasons I hate general partnerships. I hate partnerships in general, but I hate general partnerships, too!
    In other words, I think you’re OK. I would still advise speaking with an attorney and giving him or her all the details of this situation to be absolutely certain.
    —Dave