Contract Glossary
Personal Guarantee
Definition
A legally binding promise where an individual agrees to be personally responsible for a business's debt or obligation if the business can't pay. It pierces the corporate veil voluntarily, you're putting your personal assets (home, savings, car) on the line to back your company's promise.
In Practice
You start an LLC and sign a commercial lease for office space. The landlord requires a personal guarantee because your LLC has no credit history. If your business folds and can't pay the remaining $36,000 on the lease, the landlord can come after your personal bank account, not just the LLC's assets. This is the most common scenario where small business owners unknowingly give up the liability protection their LLC was supposed to provide.
Example Clause
Guarantor hereby unconditionally and irrevocably guarantees the full and timely performance of all obligations of Tenant under this Lease, including but not limited to the payment of rent, damages, and any costs of collection. This guarantee shall remain in effect for the full Term of the Lease and any renewals thereof.
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