If you've ever bought or sold real estate in the District of Columbia through a business entity that had not been formed yet, a recent decision from the D.C. Court of Appeals is worth your attention. In Ball v. Hubbard, decided August 6, 2026, the court tackled a question that comes up more often than people realize: if you sign a contract on behalf of an LLC that doesn't legally exist yet, and that LLC never gets formed, can you personally be sued for breaking the deal?

The court's answer, in short, is usually yes, and the reasoning behind it is a useful lesson for any real estate investor buying property with a "to be formed" LLC, or anyone signing a contract on behalf of a business that isn't up and running yet.

This is a common scenario for DC-area real estate investors: you find a property, you want the deal to close under an LLC for liability protection and tax purposes, and you haven't gotten around to filing the paperwork yet. Ball v. Hubbard is now the clearest word from the D.C. Court of Appeals on what happens if that LLC never comes together.

The Backstory: Buying DC Property Through an LLC That Was Never Formed

In this case, the Seller agreed to sell the Buyer a single-family home in the District of Columbia for $665,000. The purchase contract listed the buyer as "Elm Street LLC (To Be Formed)," a common setup when someone plans to hold real estate through a limited liability company for liability protection or tax reasons, but hasn't gotten around to actually filing the paperwork with the state. The Buyer signed the contract himself, initialing every page on the buyer line. The LLC was never formed. The Buyer never closed on the house. The Seller ended up selling it to someone else for less money and sued the Buyer for the $26,000 difference. As one of his defenses, the Buyer argued that he personally couldn't be on the hook for breaking the contract, because he'd only signed as an agent for the LLC, not in his own personal capacity.

The trial court initially ruled in the Buyer's favor, but the Court of Appeals reversed, issuing a decision that centers on a legal concept called "promoter liability."

The General Rule: Agents for Real Companies Aren't Personally Liable

Normally, when someone signs a contract as a representative of a company — say, a manager signing on behalf of a corporation — and the other party knows they're dealing with the company rather than the individual, the individual signer isn't personally on the hook if the deal falls apart. This is black-letter agency law: an agent acting for a "disclosed principal" isn't a party to the contract and doesn't absorb personal liability for it.

The Buyer leaned hard on this rule. He'd disclosed that he was buying on behalf of "Elm Street LLC (To Be Formed)," so, he argued, he was just the messenger. The LLC was the real buyer, and only the LLC could be sued.

Why "To Be Formed" Doesn't Protect You From Personal Liability

Here's where the court drew a critical distinction. The rule shielding agents from personal liability assumes there's an actual, legally capable principal standing behind the agent. A corporation or LLC that hasn't been formed yet has no legal existence and, therefore, no capacity to be anyone's principal. You can't be someone's agent if that someone doesn't yet exist.

Instead, the law treats a person who signs a contract on behalf of a not-yet-formed entity as a"promoter." And the general rule for promoters is the opposite of the agency rule: promoters are personally liable on contracts they sign on behalf of an entity that hasn't been created yet. The court traced this rule through decades of D.C. cases and treatises, and it makes practical sense: if signing "on behalf of an LLC (to be formed)" were enough to escape all personal responsibility, anyone could dodge a contract simply by naming a future company as the buyer and then never bothering to form it.

The court also flagged an important corollary: because forming the LLC was entirely within the Buyer's own control, he couldn't use his own failure to form it as a shield. Two overlapping legal doctrines back this up, the implied duty of good faith and fair dealing (which requires parties to actually try to satisfy conditions within their control) and the "prevention doctrine" (which says a party can't benefit from a condition failing when that party caused the failure). In plain terms: you can't create your own escape hatch by simply declining to file your LLC paperwork.

Is There an Exception to the Promoter Liability Rule in DC Real Estate Contracts?

Promoter liability isn't absolute. There's a recognized exception: if the seller specifically agreed to look only to the future company for performance — meaning the seller knowingly let the promoter off the hook personally — then the promoter isn't liable. But that exception requires an actual agreement to that effect, not just awareness that a company hadn't been formed yet.

This distinction mattered a lot here. The Buyer argued that the Seller knew all along that the Buyer wasn't buying personally and only intended to purchase through the LLC. The court agreed that might be true, but pointed out that simply knowing a buyer plans to use an LLC is not the same as agreeing to release that buyer from personal responsibility if the LLC never materializes. As the court put it, a seller "can obviously be aware that a buyer wants to purchase a property through an LLC, while at the same time having no intention or agreement to absolve them personally if they never in fact form the LLC."

How Real Estate Investors Can Avoid Personal Liability When Forming an LLC

This case is a good reminder that "to be formed" language on a contract doesn't function as a personal liability waiver. If you're buying property, entering a lease, or signing any binding agreement on behalf of an LLC or corporation that hasn't been created yet, the law generally treats you, the individual signer, as personally responsible for that deal until the entity legally exists and either ratifies the contract or the other party specifically agrees to release you.

Practical takeaways for DC real estate investors and business owners before signing on behalf of a not-yet-formed entity:

• Form the entity before you sign, whenever that's realistic. It removes the whole issue.
• If you must sign before formation, get the other party's explicit written agreement that they will look only to the future entity for performance, and that you are not personally bound. Silence or a vague understanding won't cut it, and an integration clause in the contract (a common provision stating the written contract is the entire agreement) will generally wipe out any unwritten side deal on this point anyway.
• Once the entity is formed, have it formally adopt or ratify the contract, and get the other party's sign-off that this substitutes the entity for you as the obligated party.
• Understand that walking away from the deal by simply never forming the LLC will not get you off the hook. Courts view that as bad faith and won't let a party benefit from a condition failing due to their own inaction.

FAQ: LLC Formation and Personal Liability in DC Real Estate

Can I be sued personally if my LLC isn't formed yet? Yes. Under D.C. law, if you sign a contract on behalf of an LLC or corporation that hasn't legally been created, you're treated as a "promoter" rather than an agent, and promoters are generally personally liable on those contracts.

Does "LLC to be formed" on a contract protect me from liability? No. Naming a future LLC as the buyer doesn't shield you personally. The only way to avoid personal liability is to form the entity before signing, or to get the other party's explicit written agreement to release you and look solely to the future entity.

What is promoter liability? Promoter liability is the legal doctrine holding that a person who signs a contract on behalf of a business entity that doesn't yet legally exist is personally responsible for that contract, unless the other party specifically agreed otherwise.

Can I get out of a contract by just never forming my LLC? No. Courts, including the D.C. Court of Appeals in Ball v. Hubbard, have held that a party can't benefit from a failed condition (like an unformed LLC) when that party controlled whether the condition was satisfied. This is barred under the "prevention doctrine" and the implied duty of good faith and fair dealing.

The Bottom Line

Ball v. Hubbard reinforces a rule that trips up a lot of real estate investors and business owners: signing "on behalf of" a company that doesn't exist yet doesn't make you invisible to liability. It makes you a promoter, and promoters are personally on the hook unless the other side clearly agreed otherwise.

If you're planning to buy investment property in Washington, DC or Virginia through an LLC, talk to a real estate attorney before you sign, not after.

This post discusses Ball v. Hubbard, Nos. 24-CV-0503 & 24-CV-0756 (D.C. Aug. 6, 2026), and is intended for general informational purposes only. It is not legal advice and does not create an attorney-client relationship. If you have questions about a real estate contract, LLC formation, or promoter liability in the District of Columbia or Virginia, contact Alfredo Vasquez, Esq., Law Office of Alfredo Vasquez, P.C.

This post was drafted with the assistance of AI but was reviewed by an attorney before its publication.