Personal Liability & Business Ownership

BEWARE OF TV-AD PROMISES – PERSISTENT RISKS OF PERSONAL LIABILITY Personal Liability for Business Debts

Radio and tv commercials that promise protection of all your personal wealth if you just form an LLC – fail to tell you the whole truth. Not only must you properly capitalize the entity and maintain it separate and independent of your personal assets, but owners of single member LLCs will remain personally liable for almost all the tortious acts committed by or in furtherance of the entity. (note: business insurance is one way to mitigate your exposure to personal liability)

The reason? Individual members/owners and/or managers of an LLC are still personally liable for their own conduct (i.e. actions or omissions). Where everything a single-member LLC does is generally done by that sole owner, the sole owner of the LLC can be held personally liable in addition to the entity itself. In multi-member LLCs this gets more complicated. The owner in a multi-member LLC that commits tortious conduct is personally liable for the consequences, while the other owners or managers – if not involved in the tortious conduct – are generally not personally liable.

An Example. imagine you and your brother-in-law own a company that sells widgets. Using your personal social media account you leave a post on your company’s social media page bad-mouthing a competitor and its products. The competitor sees it and decides to sue for commercial disparagement / trade libel / defamation – the competitor can sue your company and you, personally, but probably not your brother-in-law.

If you are concerned about personal liability with respect to your business, or would like to structure and register a business entity to mitigate your risk of liability, please do not hesitate to contact the Boston Business Attorneys at The Jacobs Law LLC at BUSINESS@THEJACOBSLAW.COM or call at 800-652-4783.

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