5 Signs You Might Be Personally on the Hook
1. The contract names you individually, not just your business
If the agreement asks for your personal signature as a guarantor, separate from your business entity's signature, that is the clearest sign a personal guarantee is attached.
2. It says "unlimited" or does not cap the amount
An unlimited personal guarantee makes you liable for the full obligation, plus interest and fees, with no ceiling. Limited guarantees cap your exposure to a specific amount or percentage.
3. It is a "continuing" guarantee
A continuing guarantee extends beyond the current agreement to future obligations with the same lender or landlord, even ones you have not signed yet.
4. It is "joint and several" with co-owners
This means creditors can pursue you for the entire obligation, not just your ownership percentage, even if your business partners were also supposed to share the liability.
5. There is no release clause
Without a release clause, a personal guarantee can remain enforceable even after you sell your ownership stake, leaving you exposed to obligations from a business you no longer control.
Frequently Asked Questions
What is a personal guarantee clause in a business contract?
A personal guarantee clause requires an individual business owner to personally repay a business debt or obligation if the company cannot. It bypasses the liability protection of an LLC or corporation, putting personal assets like savings and property at risk.
Where do personal guarantees commonly show up?
Personal guarantees are common in commercial leases, business loans, lines of credit, and vendor or supplier agreements, especially for newer businesses or those with limited credit history or assets.
Does forming an LLC protect me from a personal guarantee?
No. An LLC or corporation normally shields your personal assets from business liabilities, but signing a personal guarantee overrides that protection for that specific obligation, regardless of your business structure.
Can I negotiate out of a personal guarantee?
Sometimes. You can try to negotiate a limited guarantee instead of an unlimited one, request a cap on the amount, ask for a release clause tied to certain conditions, or offer collateral instead of a personal guarantee.