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Can an Owner of an LLC Be Sued for the LLC’s Actions?
If you are the owner of an LLC that has been accused of unlawful actions, you might be worried about your personal financial status. Although the owner of an LLC doesn’t have the same personal responsibility that one might have with a sole proprietorship, there are still some situations in which the owner can be held personally responsible for the LLC’s actions. Here’s what you need to know.
What Is an LLC?
A limited liability corporation is a business model that allows for one individual to own the company while enjoying the tax benefits of being a corporation. An LLC also generally prevents the owner of the company from being held personally responsible for debts and actions. An LLC is usually formed when someone wants to own their own business but wants to keep their personal and business assets and income separate.
When Can an Owner Be Sued?
The LLC organization of a company generally protects the owners from personal liability, although the LLC itself can be sued. However, courts have the ability to determine when an owner of an LLC can be sued. In most cases, you will risk being sued as an owner of an LLC if any of the following apply:
- The LLC was knowingly used for illegal actions or practices by the owner.
- There is no real distinction between the owner and the LLC.
- The owner committed fraud as an officer of the company.
- The owner doesn’t make the distinction between themselves and the company clear to the third party.
If any of these situations applies to your legal matter, there is a chance that the courts could allow you to be named as a defendant, even though the LLC should be protecting you as a general rule. Due to these complications, if you or your LLC is being named in a civil lawsuit, you should contact an attorney immediately. Call us today for more information or to schedule a consultation.