When Can You Sue a Business Owner of an LLC
Dec 21 2022 0

When Can You Sue a Business Owner of an LLC?

Typically, if you have a dispute with an owner of a limited liability company, or an LLC, due to the structure of the business, you will not be able to sue the owner directly. This is because LLCs shield owners in most situations from personal liability. Each type of business structure has its advantages, limitations, and guidelines. When a business owner is determining what type of structure to choose, they will assess many things, including ownership, liability, and taxes.

Even though the LLC structure does offer owners, or members as they are known, protection from liability in many situations, this protection is not ironclad in all situations. If you would like to sue an individual in an LLC, it may be possible in certain circumstances. To learn more about the process and if this is a possibility for you, the Los Angeles business attorney at the Leiva Law Firm can meet with you to go over your legal options.

Suing an LLC’s Owner

When Can You Sue a Business Owner of an LLCLLCs are popular business structures for many different types of businesses and for many reasons. And even though single business owners often find that LLCs are of particular benefit to their company, LLCs can be more than one owner or even another LLC.

LLCs are particularly attractive because they separate an owner from the company itself. As such, if the LLC business takes on debt, that debt is the company’s, not the owner’s. Because of this, an owner’s assets may not be at risk to pay off such debts. Additionally, there are minimal formalities that must be adhered to. 

Where an owner is not shielded by their LLC designation is when they either provide personal guarantees or if the court determines they must assume liability. So, if the owner of an LLC personally goes into an agreement with another party and says that they will pay for services or goods, but they fail to do so, this may be a breach of contract on the owner’s part. As a result, the aggrieved individual who was not paid may have a case to make directly against the owner for damages.

Piercing the corporate veil is another way to hold an owner of an LLC personally accountable for their actions. What this means is that a case is taken to court, and there it is decided that the protection the LLC offers an owner will not apply. While getting the courts to take this step is a challenging task, and courts do not take this action lightly, there are instances where the court will be amenable to a plaintiff.

Speak with a California Business Attorney Today

While it is possible to sue an owner of an LLC personally for your damages, these suits generally tend to be complicated and challenging. Though if your situation is one where there was a personal guarantee or if the court believes that it has sound reason to lift the LLC’s protections, then holding the owner responsible for their actions can be feasible.

For questions regarding civil matters in California, please call the Los Angeles civil litigation attorney at the Leiva Law Firm to schedule your free consultation at (818) 519-4465. 

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