Does an Indiana LLC actually protect your personal assets?

A Fishers HVAC company botches a commercial install, the building owner sues, and the complaint names both the company and its owner personally. The owner's first reaction is that opposing counsel made a filing error, because he set up the LLC six years ago for the specific purpose of keeping his house out of a lawsuit. His second reaction, after his own lawyer explains that naming him was a deliberate choice, is the question most Indiana owners get around to eventually: does an Indiana LLC actually protect your personal assets? In ordinary business disputes it does, and Indiana courts say so in fairly strong terms. The exceptions are narrow, but they are real, and most of them have nothing to do with the courtroom doctrine owners have heard about.

What Indiana law says about member liability.

The starting point is Indiana Code section 23-18-3-3. A member, manager, agent, or employee of an LLC is not personally liable for the debts, obligations, or liabilities of the company, whether they arise in contract, tort, or some other way, and is not liable for the acts or omissions of anyone else in the company. That is broad protection, and it is the reason a supplier with an unpaid invoice generally cannot chase the owner's savings account after the company runs out of money.

Read the second sentence of that same subsection, though, because it does most of the work in real disputes. A member, manager, agent, or employee may be personally liable for that person's own acts or omissions. The statute shields you from what the company did and from what your business partner did. It does not shield you from what you did.

When does an Indiana court pierce the corporate veil?

Indiana courts disregard an LLC when the owner used it as an alter ego rather than as a real company. That misuse also has to have caused the harm being claimed. Courts weigh eight factors, including undercapitalization, absence of records, commingled assets, and disregard of formalities.

Indiana applies that analysis to limited liability companies the same way it applies to corporations. The causal connection requirement is the part owners tend to miss, and it cuts in their favor. In Country Contractors, Inc. v. A Westside Storage of Indianapolis, Inc., 4 N.E.3d 677 (Ind. Ct. App. 2014), an excavation contractor walked off a Hendricks County job without paying its subcontractors, and the trial court held the two shareholders personally liable. The Court of Appeals reversed that ruling. The company's records were in bad shape, but nobody connected the sloppy records to the harm the owner suffered, and the court held that a plaintiff left with no other way to collect has not thereby earned a reason to pierce.

Blackwell v. Superior Safe Rooms LLC, 174 N.E.3d 1082 (Ind. Ct. App. 2021), shows the other side. The LLC had about three hundred dollars in its bank account, no tax records, no payroll records, no balance sheets, no employees, no equipment, and no place of business. It shared officers, addresses, and email accounts with a separate excavating company that performed the actual work, and it functioned as a device for routing business to that company. The Court of Appeals reversed the trial court's refusal to pierce. The difference between the two cases is not the quality of the paperwork, since both companies had recordkeeping problems. The difference is whether the entity was doing anything real.

The exposure that has nothing to do with veil piercing.

Most Indiana owners who end up personally liable get there without ever litigating an alter ego claim, because they signed the protection away or created liability outside the entity. Veil piercing draws the attention while accounting for the fewest cases. Three other routes carry the bulk of the exposure, and each one is easier to see coming.

The first and most common is the personal guarantee. Banks, equipment lessors, landlords, and increasingly material suppliers ask owners to sign one, and the signature does what it says. A guarantee on a shop lease survives the company's collapse, and no amount of careful corporate housekeeping undoes it. Owners are often surprised to learn they signed one, because the guarantee language sits at the bottom of a credit application that felt like paperwork at the time.

The second route runs through your own conduct. If you personally supervised the install that failed, made the representation that turned out to be false, or drove the truck that caused the accident, the LLC does not put a wall between you and that claim. This is the second sentence of section 23-18-3-3 doing its work. The company may be liable alongside you, which is worth something, but you remain a defendant.

The third route is trust fund taxes. Under Indiana Code section 6-2.5-9-3, an individual with a duty to remit sales tax holds that money in trust for the state and is personally liable for it. Indiana Code section 6-3-4-8 imposes comparable personal liability for withheld income taxes. Federal law does the same for withheld payroll taxes through 26 U.S.C. section 6672. An owner who covers payroll out of withheld taxes during a slow quarter has created personal exposure that no entity structure reaches.

What keeps your personal assets protected.

The habits that matter are unglamorous and cheap. Keep a separate bank account and stop running personal expenses through it. Capitalize the company enough to meet the liabilities the business can reasonably expect, which was the fact that hurt the defendants in Blackwell. Sign contracts in the company name with your title, so the other side knows who it is dealing with. Keep the records Indiana Code section 23-18-4-8 already requires you to keep, including the member list, the articles, and the tax returns.

Read every credit application and lease before signing, and ask whether a guarantee is negotiable, because sometimes it is. Carry insurance sized to the work, because the entity and the policy do different jobs and neither substitutes for the other. When ownership or management changes, update the operating agreement and the bank signature cards rather than leaving the paperwork describing a company that no longer exists.

When to call a lawyer about personal exposure.

A few patterns are worth a conversation before they harden into a problem. None of them requires a pending lawsuit. Each is a point where the decision you make now sets how much personal exposure you carry later:

- A demand letter or complaint that names you individually alongside the company

- A lender, landlord, or supplier asking for a personal guarantee on anything substantial

- Falling behind on sales tax or payroll tax remittances

- Discovering that company and personal funds have been mixed for a while

- Buying or selling a business, where guarantees and successor liability both come into play

- Starting a second entity that shares people, addresses, or accounts with the first

- Any claim arising from work you personally performed or supervised

Personal exposure usually gets decided long before a claim arrives, in documents that were signed without much thought at the time. Reviewing a guarantee takes far less effort than arguing about it after a default. You can read more about the practice at https://www.indybusinesslaw.com/about.

Frequently asked questions about Indiana LLC personal liability.

Can someone sue me personally if I have an LLC in Indiana?

Anyone can name you in a complaint, and plaintiffs' lawyers often do it as a matter of course. Whether the claim against you survives is a different question, and under Indiana Code section 23-18-3-3 the answer is usually no where the claim is really against the company. Being named is not the same as being liable, though it does mean you need counsel.

What is piercing the corporate veil in Indiana?

It is the equitable doctrine that lets a court disregard the entity and hold owners personally responsible for company obligations. Indiana courts weigh the eight factors listed in Aronson v. Price, including undercapitalization, missing records, and commingled funds. The plaintiff carries the burden and has to show a causal link between the misuse of the entity and the injustice complained of.

Does a single member LLC protect personal assets in Indiana?

Yes. Indiana Code section 23-18-3-3 does not distinguish between single-member and multi-member companies. What does matter is that a single-member company is easier to run carelessly, because there is no partner asking why the company card paid for a vacation. The separation has to be real regardless of how many owners there are.

Am I personally liable if I signed a personal guarantee?

Generally yes, within the terms of the guarantee you signed. A guarantee is a separate promise from you to the creditor, and the LLC's limited liability does not reach it. Some guarantees are limited in amount, limited in time, or released once the company hits certain benchmarks. Pull the document and read what you actually agreed to before assuming the worst.

Can I lose my house if my LLC gets sued?

Not from an ordinary claim against the company. A judgment against the LLC gets collected from the LLC's assets. Your home comes into play if you guaranteed the obligation, if the claim is based on something you personally did, or if a court disregards the entity, and Indiana also provides homestead and other exemptions that apply separately.

Do I need a separate bank account for my LLC?

Yes, and it is the single most useful habit on the list. Commingling of assets is one of the Aronson factors, and a shared account is the easiest thing for opposing counsel to find in discovery. It also makes bookkeeping and tax preparation cheaper. There is no legitimate reason to run an operating business out of a personal checking account.

Does an LLC protect me from my own negligence?

No. Indiana Code section 23-18-3-3 says a member or manager may be personally liable for that person's own acts or omissions. If you did the work that caused the injury, you can be a defendant regardless of the entity. This is what liability insurance is for, and it is why owners who still swing hammers or drive trucks should look closely at coverage.

Am I personally liable for my LLC's unpaid sales or payroll taxes in Indiana?

Potentially yes. Indiana Code section 6-2.5-9-3 makes individuals with a duty to remit sales tax personally liable for it, and Indiana Code section 6-3-4-8 does the same for withheld income tax. Federal law reaches withheld payroll taxes under 26 U.S.C. section 6672. These obligations follow the person with authority over payment, not the entity.

Does business insurance replace an LLC?

No, and neither replaces the other. Insurance pays claims within its coverage limits and exclusions. The entity determines whose assets are on the hook when a claim exceeds coverage or falls outside it. A business with real exposure wants both, sized to the work it actually performs.

If you have been named personally in a claim against your company, or you are being asked to sign a guarantee and want to understand what you are taking on, it is worth a conversation before the deadline arrives. Anne works with Indiana owner-operated businesses on entity matters, contracts, and disputes.

The information provided in this article is for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. For legal advice tailored to your situation, please contact us directly.