Unless you personally guaranteed the MCA as an individual, a court pierced the corporate veil, or you committed an act of fraud, you are not personally liable for an MCA. If you are a sole proprietor or general partner, you are liable from the outset.
Are you personally liable for MCA debt just because you own the business?
If your business is an LLC or corporation, you are not personally liable for its debts. Pennsylvania’s LLC statute makes the company’s debt “solely” the company’s; a member or manager is not personally liable “solely by reason of being or acting as a member or manager” (15 Pa.C.S. 8834). New York, whose law MCA contracts frequently choose, agrees: a member is not liable “solely by reason of being such member, manager or agent” (New York Limited Liability Company Law 609).
A sole proprietor is liable from the outset. Because a sole proprietorship is not a separate legal entity, you “can be held personally liable for the debts and obligations of the business,” according to the SBA. A general partner is “jointly and severally liable for all debts, obligations and other liabilities of the partnership” under 15 Pa.C.S. 8436. The funder must still name you individually and generally exhaust partnership assets first.
How does a personal guarantee make you liable?
Nearly every MCA contract includes a personal guarantee. Because it is a separate contract with you, your business’s bankruptcy discharge “does not affect the liability of any other entity on, or the property of any other entity for, such debt” (11 U.S.C. 524(e)).
Typically it is a guarantee of payment, which makes you responsible for the remaining balance if your business stops paying. Sometimes it is a guarantee of performance (also called a “validity guarantee”), which makes you responsible if you violate a listed covenant, e.g., diverting receivables or changing bank accounts. In February 2026, a New York appellate court described contracts that let funders enforce the guarantees once a merchant suspended or terminated its business.
New York’s highest court held in 1961, in Salzman Sign Co. v. Beck, that an officer who signed only as “pres.” was not bound by a clause saying signing officers “personally guarantee” the deal. MCA contracts often require a second, individual signature. Read the contract itself; the FTC alleged in 2020 that one funder promised “no personal guaranty” on its websites but included one in its contracts. On enforceability, see Is a Personal Guarantee on an MCA Enforceable?
Can an MCA funder come after you without a guarantee?
A funder can try to pierce the corporate veil, but it is difficult. In Lumax Industries, Inc. v. Aultman (1995), the Pennsylvania Supreme Court noted a “strong presumption” against piercing the corporate veil and listed the relevant factors:
- undercapitalization,
- failure to adhere to corporate formalities,
- “substantial intermingling of corporate and personal affairs,” and
- use of the corporate form to perpetrate a fraud.
That the owner alone ran the business was irrelevant, and the court vacated a $70,000 verdict against him. But funders with a personal guarantee will rarely need to pierce the veil. See Can an MCA Funder Pierce the Corporate Veil?
When does your own conduct make you personally liable?
You are liable for your own wrongful acts, regardless of entity type or whether you provided a personal guarantee. In Wicks v. Milzoco Builders, Inc. (1983), the Pennsylvania Supreme Court held that, under the participation theory, an officer is liable for misfeasance “as an actor rather than as an owner,” but not for “mere nonfeasance.” Failing to pay is nonfeasance; lying on the application, doctoring bank statements, or diverting receivables you sold to the funder may be misfeasance.
Courts distinguish between breach of contract and fraud in inducing a contract. In a 2023 Delaware Superior Court case, an owner was sued personally for fraud after his companies entered into “no fewer than thirty-three merchant cash advance agreements” and he represented that the collateral was free of liens. The court dismissed fraud claims that merely restated the contract claims but let the inducement claims proceed.
Liability for fraud is worse because certain debts cannot be discharged in an individual’s bankruptcy, including debt obtained by false pretenses, by a materially false written statement about the debtor’s financial condition, or for willful and malicious injury (11 U.S.C. 523(a)). The Fifth Circuit has held these exceptions apply to a company under Subchapter V. The company obtained $190,000 for $299,800 in receivables, represented that it did not anticipate bankruptcy, and filed two weeks later. Transferring business assets to yourself or a new company after being sued may be one of the “badges of fraud” under Pennsylvania’s voidable transactions law.
How can you tell which route applies to you?
Ask these questions in order:
- Are you a sole proprietor or a general partner? If so, you are liable.
- Did you sign a personal guarantee, either on a separate page or next to “individually”?
- Did you guarantee payment or performance, and are any of the listed triggers present?
- Did you make false statements, stack advances without disclosure, divert receivables, or transfer assets?
- Did you commingle bank accounts, fail to keep records, or operate without capital?
The MCA company cannot access your assets until it has a judgment against you, and even then several exemptions can protect them. See 5 Exemptions that Shield Owners in MCA Cases.
Frequently Asked Questions
Can MCA companies sue me personally if I did not sign a personal guarantee?
The MCA company could try to pierce the corporate veil, though Pennsylvania has a strong presumption against it. It could also try to prove that you committed fraud or other wrongs personally.
If my business files for bankruptcy, won’t that protect me?
The discharge of a debtor’s debt does not affect the liability of any other entity on the debt. Chapter 13’s codebtor stay does not apply to an individual who became liable in the ordinary course of business. In Chapter 7, an LLC or corporation cannot obtain a discharge because it is not an individual.
If I close my LLC, won’t that make me liable?
Under Pennsylvania’s LLC statute, dissolution, winding up or termination does not affect members’ limited liability. However, if you signed a guarantee of performance, you may be liable if closing the business is one of its listed triggers.
Does signing a confession of judgment make me personally liable?
A confession of judgment speeds up a judgment for a liability that already exists, most likely under a personal guarantee. In New York, the affidavit can only be filed in the county where the defendant resided at signing or resides at filing. In Pennsylvania, you generally have 30 days after notice to petition to strike or open the confessed judgment.