Two people start a business together, split ownership 60/40, and years later one of them fills out a funding application alone and wonders whether the other partner needs to be involved at all. Three siblings inherit an LLC in equal thirds and none of them is clearly in charge. A husband and wife co-own a shop and only one of them wants their name on a personal guarantee. These are not edge cases; they are the normal shape of a lot of small businesses, and the question of who has to sign, and what it means for the owners who do not, deserves a straight answer before anyone applies.
How your ownership structure already decides liability, before any guarantee is signed
Separate from any funding application, the way a business is legally structured already sets a default answer to "who is on the hook for business debts":
- Sole proprietorship. There is one owner, and that owner is personally liable for business debts by default. There is no separate entity to shield them.
- General partnership. Each general partner is typically personally liable for the partnership's debts, including debts another partner took on in the business's name, even without signing anything individually for that specific debt. This is a common surprise for a partner who assumed they were protected by not being the one who applied.
- LLC, multi-member LLC or corporation. Owners are not personally liable for the entity's debts by default. That protection is the point of forming the entity. It can still be set aside for one specific debt if an owner personally signs a guarantee for it, which is exactly what a funding agreement's personal guarantee clause does.
So the starting point is not "did I sign the funding application," it is "what type of entity the business is, and did I personally guarantee this specific debt." Those are two different questions with two different answers.
What "majority owner" means on a funding application, and what happens without one
Application forms and document checklists on this site, and across the industry, commonly ask for the application and the personal guarantee to be signed by the "majority owner." In practice that means the owner who holds a controlling or clearly largest ownership stake, the person a funding source treats as able to speak and sign for the business.
The harder case is when there is no majority owner at all, a 50/50 split between two owners, or three or more owners in roughly equal shares. There, no single person holds control, and a funding source commonly asks more than one owner to sign rather than accepting one signature on behalf of everyone. Exactly how a funding source handles this varies: some set a specific ownership percentage above which an owner must also be identified or asked for ID, as noted on T.A.G.'s own document readiness checker, which flags that some funders request identification from any owner above a stated ownership share, not only the majority owner. T.A.G. does not apply one fixed percentage rule across every file the way a federal loan program does; it depends on the specific funding source and file.
Several guarantee vs. joint and several guarantee
This is the single most important phrase to find in the contract, and it decides what happens to a co-owner who did not sign anything:
- Several guarantee (sometimes called a limited or percentage guarantee). Each signing guarantor is liable only for their own defined share. If two owners each guarantee 50 percent, a default exposes each of them to roughly half, not the whole balance.
- Joint and several guarantee. Every signer is individually liable for the entire remaining balance, not a proportional share. If a contract with two signing guarantors is joint and several and one of them cannot pay, the funding source can pursue the other signer for the full amount, not half of it.
Either way, an owner who did not sign the guarantee at all is a different case again: they are not a party to that contract's guarantee, so they are not liable under it, whether the signers' guarantee happens to be several or joint and several. The joint and several language only reaches among the people who signed. T.A.G.'s guide on how to read an MCA contract walks through this exact clause in the context of reading a funding agreement line by line, including the related point that a spouse asked to co-sign should get their own legal advice first, since community property rules in some states can reach marital assets even when the spouse is not an owner at all.
How this works differently on an SBA loan
SBA loans are a useful contrast because, unlike MCA and most alternative funding, they follow one specific written federal rule. Under SBA regulations for 7(a) loans (13 CFR 120.160), any individual who owns at least 20 percent of the borrowing business generally must personally guarantee the loan, in addition to whoever signs as the business's authorized signer. SBA, working with the lender, can require other individuals to guarantee as well, and the regulation names a narrow exception for an employee stock ownership plan. That is a specific government threshold tied to that specific program.
MCA and other alternative funding sources are not bound by that rule. There is no single federal percentage that applies across every alternative funding source the way the 20 percent threshold applies to SBA 7(a) loans. Which owners need to sign, and whether ownership above a certain share triggers an additional identification or signature request, is set by the individual funding source reviewing the file, not by a uniform law. Do not assume an SBA-style 20 percent rule carries over to an MCA or alternative funding application; ask what the specific funding source requires for your file.
The LLC myth: an entity does not erase a guarantee you already signed
A common and understandable assumption is that once a business is an LLC, its owners are fully shielded from everything. That protection is real for the business's ordinary debts, but a personal guarantee works differently: it is a separate personal promise an individual makes, in their own name, as a condition of that specific funding agreement. Signing it moves that one debt outside the LLC's liability shield for that signer, on purpose, which is the entire reason a funding source asks for it.
Forming an LLC after the fact does not undo a guarantee already signed. Adding a non-owner manager, or restructuring who holds equity, does not retroactively remove a signature that is already on a contract. The only thing that changes who is liable under a personal guarantee is what the guarantee itself says and who signed it, not the business's corporate form.
Before co-owners apply together
- Confirm who is listed as an owner of record, and at what ownership percentage, before the application is filled out. A funding source will ask, and guessing creates delay later.
- Decide who is signing, and say so out loud among the owners. If there is a clear majority owner, that is usually straightforward. If ownership is split evenly, expect that more than one signature may be requested.
- Read the actual guarantee clause once an offer exists, specifically whether it says several or joint and several, rather than assuming either one. See how to read an MCA contract for exactly where that language typically appears.
- If a spouse is asked to co-sign and is not an owner, treat that as its own decision, not a formality, and get independent advice before agreeing, particularly in a community property state.
- Do not assume a non-signing owner is automatically protected or that an LLC alone settles the question. Confirm it against the specific contract language, every time.
None of this changes T.A.G.'s underlying document standard: the application still needs to be signed by the appropriate owner or owners, and the funding review still runs on the four most recent complete, consecutive business bank statements, in the business's own name. See MCA funding requirements for the full document list.
Frequently asked questions
Does every business owner have to sign the funding application?
Not automatically. A funding source decides who has to sign, and the usual practice is that the owner with the controlling or largest ownership stake, often called the majority owner, signs the application and the personal guarantee. Other owners are listed as owners of record but do not automatically sign anything themselves.
What happens if ownership is split 50/50 with no majority owner?
When no single owner holds a controlling stake, a funding source commonly asks more than one owner to sign, since no one person can act alone for the business. The exact rule varies by funding source; T.A.G. does not apply one fixed percentage cutoff across every file the way a federal program does.
If I co-own the business but do not sign the guarantee, am I personally liable?
Generally no. An owner who does not sign a personal guarantee is not personally liable under that guarantee just because they hold equity. The exception is a contract that states the guarantee is joint and several among the people who did sign; in that case, each signer, not each owner, is liable for the full amount. Read the guarantee clause itself rather than assuming.
Does forming an LLC protect owners from a personal guarantee they signed?
No. An LLC or corporation shields owners from the business's ordinary debts, but a personal guarantee is a separate contract an individual signs personally. Forming an entity, or not being the one who signed, does not erase a guarantee that someone already agreed to in their own name.
Do SBA loans use the same ownership rule as MCA or alternative funding?
No, and the difference is worth knowing. SBA regulations require that any owner holding at least 20 percent of an SBA 7(a) borrower generally guarantee the loan personally, with limited exceptions such as an employee stock ownership plan. MCA and other alternative funding sources are not bound by that specific federal rule; how many owners need to sign, and at what ownership share, varies by funding source rather than following one fixed government percentage.
Will applying affect my credit score?
Initial funding decisions are based primarily on your business's bank-statement cash flow, without a hard credit inquiry before the initial decision. Additional underwriting and credit checks, potentially including a hard inquiry, may occur before final funding.