Where the wall holds and where it leaks
For ordinary trade debt, the structure usually does what it was designed to do. It leaks in predictable places: obligations an owner guaranteed personally, payroll taxes withheld from employees, and accounts used for both company and household expenses until nobody can tell them apart. An LLC that never held a meeting, never documented a contribution, and never kept its own books gives a creditor an argument it would not otherwise have. Claims based on an owner's own conduct also follow the individual regardless of the entity.
Two different assets
The company's debts and the company's assets belong to the company. A member's interest in the LLC is that member's own asset, and it is treated separately if the member faces creditors personally. In a single-member company the two sets of facts sit so close together that they have to be separated deliberately. Distributions taken in better years are reviewed in that light as well. In a multi-member company the other members have interests of their own, and a small business LLC bankruptcy can affect people who had nothing to do with the debt.
What we look at first
The operating agreement, because it often contains provisions triggered by a member's insolvency, by a transfer of an interest, or by a deadlock. Then contributions, distributions, and member loans over recent years, since money moving in either direction gets examined. Then how the bank account has actually been used, and how the company is classified for tax purposes, which shapes who owes what to the tax authorities. That review usually tells us more about the real exposure than the debt schedule does.
