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Am I Free from Liability Under an LLC?

One of the biggest misconceptions surrounding owning and operating a business as a Limited Liability Company is that the individual who owns the LLC is entirely insulated from personal liability. While an LLC does in fact offer protections to the individual who owns the LLC, there are several situations where the owner may find themselves in a situation where their personal assets are at risk.  While some of the reasons seem obvious, there is one situation in particular that may catch many LLC owners by surprise.

If an LLC owner has employees, so long as those employees are conducting their business within the law, the owner of the LLC is free from personal liability if one of his employees causes the LLC to be open to liability. However, if the owner of the LLC or one of his employees (with the owner’s knowledge) engages in criminal or fraudulent activity, the owner of the LLC will be personally liable for whatever damage is caused by said criminal or fraudulent activity. If the owner of an LLC is performing work on his own and causes the LLC to be open to liability, the owner (the individual performing the work), will then be open to personal liability. This is a concern to many LLC owners as most individual operating an LLC, perform work personally under the name of the LLC. There is of course a solution to the personal liability an individual may find themselves facing if performing work under the name of their LLC.

An owner of an LLC should always carry an insurance policy that will cover the LLC and its owner(s) from liability in the event the LLC and its owner(s) are being sued. This is the absolute best protection one can have against personal liability. I often times hear someone say that they’ve never been sued, and that they don’t foresee themselves getting sued in the future so insurance is an unnecessary expense. I must caution anyone who has that same mindset, while owning a business is and exciting time in most peoples lives, owning a business comes with one almost absolute certainty, you will be sued! Should you find yourself considering creating an LLC, please feel free to call our office to schedule a consultation so that we can create an LLC that best suites your needs.

By Thomas S. Hill, Esq.

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