I run a small online store selling home goods. Last month I placed an $8,000 order with a new supplier. I signed the contract without noticing it was in my personal name instead of my LLC. Now the supplier is saying I'm personally liable for the full amount if the products don't sell. I'm freaking out. Has anyone dealt with this? Can I fix it retroactively?
Personal Liability
I ordered $8,000 in products before realizing the supplier contract was in my personal name
Did you actually sign it personally, or did the contract just list your name as the contact? There's a big difference. If it's a personal guarantee clause, you might be stuck.
this is why I always have my lawyer review contracts. But that doesn't help you now. First, check if there's a clause allowing assignment to your LLC. Some suppliers will let you novate the contract for a fee.
Just because it's in your personal name doesn't automatically mean you're liable if the LLC was the intended party. Courts look at intent. But it's a mess to clean up. Get a business attorney yesterday.
I had something similar. Supplier wouldn't budge. I ended up paying personally and then had the LLC reimburse me with a loan agreement. Not ideal but it kept the relationship.
Thanks. I checked and there's no assignment clause. The contract just says 'quietstorm22 doing business as [store name]' but my LLC isn't mentioned anywhere. I didn't even realize until my accountant pointed it out.
Ouch. That 'dba' wording might work in your favor though. If you can show the LLC was the operating entity and the supplier knew that, you might argue mutual mistake. But it's not a slam dunk.
How did you pay? If the LLC's bank account or card was used, that's evidence of intent. Also, did the supplier's invoice include your EIN? Small details matter.
Paid with the LLC's credit card. Invoice has the LLC's EIN. But the contract itself is the problem.
Then you have a decent case for equitable reformation. But you'll need a lawyer to send a demand letter. Don't just hope it goes away.
Also consider your state's laws on sole proprietorships. If you were operating as a sole prop before forming the LLC, the supplier might argue you're personally liable anyway. When did you form the LLC?
This is a good reminder to never sign anything without reading it twice. I feel for you, OP. Hope it works out.
Any chance the supplier is willing to amend the contract? Sometimes a simple addendum that names the LLC and releases you personally can work if you offer to pay a bit more or commit to future orders.
If the supplier is threatening personal liability, they might be bluffing. Most won't sue over $8k because legal fees eat the profit. But they could send it to collections and ding your personal credit. Don't ignore it.
Formed the LLC two years ago. I've been operating under it. This was just a careless mistake. I've reached out to a local small business legal clinic for a consultation.
Good move. Also, start documenting everything. Emails, invoices, payment records. If it goes to court, you want a clear paper trail showing the LLC was the real party.
Legal clinic is smart. They might help you draft a letter to the supplier explaining the mistake and asking for a corrected contract. Keep it professional, not adversarial. Good luck.