Be Careful About Signing Personal Guarantees

Smart entrepreneurs conduct business through separate business entities such as LLCs or corporations in order to enjoy limited liability protection (personally) from debts and obligations of the business. However, the reality of small business ownership is that, as an owner, you likely will be required to sign personal guarantees for many of your company’s most significant obligations (e.g, a commercial lease, franchise agreement, or business loan from a third-party lender). Far too many business owners sign broad, unlimited personal guarantees without reading them carefully or understanding their potential consequences. As a small business startup, you may not have enough bargaining leverage to avoid the personal guarantee altogether, but you’d be crazy not to try to negotiate some basic protections for yourself. Reach out if we can be of assistance with your small business legal needs.