Section 18 of the Delaware Limited Liability Company Act states that a member of an LLC is not personally liable for any debts or obligations of the business if they do not serve as manager or agent.
The DLLC Act grants DLLCs the authority to “indemnify and hold harmless any member, manager, or other person from and against any and all claims and demands whatsoever.” This limitation on personal liability and expansive scope of permissible indemnification are in stark contrast to the protections enjoyed by stockholders, officers, and directors of a Delaware corporation.
Section 18 is a section of the Delaware Limited Liability Company Act that states that a member of an LLC is not liable for the debts and obligations of the LLC if the member is not a manager or agent of the LLC.
Section 18 of the Delaware Limited Liability Company Act states that, unless otherwise provided, all debts and obligations of an LLC belong solely to it. Furthermore, no member of an LLC is liable for these debts or obligations if they are not managers or agents of the business.
At formation, members of an LLC could either agree on managers to oversee operations of the business, or delegate this responsibility to others. In either case, the governing authority provision in an LLC’s Certificate of Formation should state whether management will take place through managers or list the names of those individuals responsible for running it.
Delaware law permits various changes within an LLC, such as asset sales, transfers or conversions. This flexibility can be advantageous for companies looking to make major adjustments like reorganizing or facilitating a spinoff or sale without dissolving their original business, or requiring legal distribution of assets like rights and properties without dissolving it altogether.
In addition to changing the structure of a Delaware LLC, owners have the power to decide the number and classes of officers as well as the qualifications of its managers. Officers and Managers in an LLC are accountable for overseeing day-to-day operations of their business entity as well as making crucial financial decisions.
The officers of an LLC are accountable for either authorizing or disapproving the use of its name and appointing directors. These officers may be appointed for a term that runs throughout the life of the LLC, or they can be elected at any point during its existence.
Section 18 allows a member to be liable for the debts of the LLC if the member is a manager or agent of the LLC.
What is Section 18?
The Delaware Limited Liability Company Act allows members of an LLC to be held personally liable for the debts and obligations of their business if they act as manager or agent of said LLC. This provision of law is essential for those in an LLC who want to safeguard themselves from potential legal repercussions resulting from their decisions.
In addition to being liable for the debts and duties of an LLC, members can also hold other members responsible. This is especially helpful in cases where one or more members hold control over operations of the business entity such as directors or trustees.
However, before an LLC member can be held liable for the actions of another member, they must first have acted in a way that was consistent with their own interests as a member. That is why it’s critical for an LLC to be managed by someone designated as its manager.
To shield members from this potential harm, the Delaware Legislature has passed statutes that limit personal liability for members. These include the LLC Act and Partnership Act.
Statute 18-803 defines a member as any individual designated by an LLC as either a member, holder of financial rights, officer or manager. It further states that members are not personally liable for any debts or obligations of the LLC unless and until it has been determined by a court that their actions conflict with their own interest as either a member or manager.
Recently, the General Assembly amended the Delaware LLC Act to ensure that members are not held liable for the actions of other LLC members. This clarification comes in response to recent court cases regarding member liability in an LLC.
