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My LLC is Being Sued - What About Personal Liability

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  • 09-24-2009, 09:41 AM
    llchelp
    My LLC is Being Sued - What About Personal Liability
    My question involves business law in the state of: Florida

    I have an LLC in Florida that has gone out of business. We had a contract with an advertising outlet for 6 months, of which we only completed 2 months. We failed to reach a settlement agreement and now we are likely going to small claims court.

    My question pertains to the personal liability if we lose. Can a judgment be passed onto me, the owner? The company owns no property and has no assets, it was funded directly by my other companies, although they have no legal relationship (different LLC's)
  • 09-24-2009, 01:15 PM
    Antigone
    Re: My LLC is Being Sued - What About Personal Liability
    Quote:

    Quoting llchelp
    View Post
    My question involves business law in the state of: Florida

    I have an LLC in Florida that has gone out of business. We had a contract with an advertising outlet for 6 months, of which we only completed 2 months. We failed to reach a settlement agreement and now we are likely going to small claims court.

    My question pertains to the personal liability if we lose. Can a judgment be passed onto me, the owner? The company owns no property and has no assets, it was funded directly by my other companies, although they have no legal relationship (different LLC's)

    That depends on whether or not you signed a personal guarantee.
  • 09-24-2009, 01:57 PM
    llchelp
    Re: My LLC is Being Sued - What About Personal Liability
    No, I did not. In addition, the signature line to the contract states "Advertiser's Agent".
  • 09-26-2009, 10:40 AM
    SChinFChin
    Re: My LLC is Being Sued - What About Personal Liability
    Quote:

    Quoting llchelp
    View Post
    My question involves business law in the state of: Florida

    I have an LLC in Florida that has gone out of business. We had a contract with an advertising outlet for 6 months, of which we only completed 2 months. We failed to reach a settlement agreement and now we are likely going to small claims court.

    My question pertains to the personal liability if we lose. Can a judgment be passed onto me, the owner? The company owns no property and has no assets, it was funded directly by my other companies, although they have no legal relationship (different LLC's)

    I would wait for the case goes to small claims, and see if the "LLC" AND the owner are both sued.

    I had a business as an LLC, and the prior owner was an S Corp, and there was a case where the S Corp and the owner was sued, the owner himself for negligience.

    I asked my attorney the question about my own liability for the business I was in, since sold, and held in an LLC. His opinion is that the bar is high for suing the owner, and he would fight this very issue, and feels the creditor would think twice before going this route.

    For instance, the creditor would have to prove that he knew there were no funds available at the time. If an employee made the decision, then the owner won't even be involved.

    Usually, in these cases, the creditor or collection agency may start off the bat offering 50% off right away, particularly if he has to go the route of suing the owner personally.

    Right now, I'm doing consulting for a client that refused to pay a bill to an 'advertising on the web' type outfit. When the collection agency called, the company asked for documentation of what was done, and when the agency heard that, offered 50% off right away.
  • 09-26-2009, 11:42 AM
    Scott67
    Re: My LLC is Being Sued - What About Personal Liability
    Quote:

    Quoting llchelp
    View Post
    I have an LLC in Florida that has gone out of business. We had a contract with an advertising outlet for 6 months, of which we only completed 2 months. We failed to reach a settlement agreement and now we are likely going to small claims court.

    My question pertains to the personal liability if we lose. Can a judgment be passed onto me, the owner? The company owns no property and has no assets, it was funded directly by my other companies, although they have no legal relationship (different LLC's)

    An LLC exists to limit the liability of the members (owners). People doing business with the LLC are thus constructively notified by the fact that they are dealing with an LLC that the members are not personally liable, even when signing for the LLC. In the absence of a personal guarantee signed by a member, the member is not liable for debts of the LLC. This does not mean that the member could not be named in a lawsuit; it means that the member would have a very high likelihood of prevailing against the lawsuit.
  • 09-28-2009, 10:45 AM
    llchelp
    Re: My LLC is Being Sued - What About Personal Liability
    Thank you all for the answers. I am quite affluent in business law, however this was my first case where personal liability played a role. I am usually the plaintiff, not the defendant. I will post an update once this plays out.
  • 10-01-2009, 07:30 PM
    Bubba Jimmy
    Re: My LLC is Being Sued - What About Personal Liability
    Quote:

    Quoting Scott67
    View Post
    This does not mean that the member could not be named in a lawsuit; it means that the member would have a very high likelihood of prevailing against the lawsuit.

    That is not necessarily true. If an individual can be shown to have acted negligently or maliciously I could be able to prove personal liability to a judge's satisfaction. For example, let's say you build block walls for houses and you have an LLC. If you personally build the wall that falls on my child and kills him, I do not have to sue the LLC. I can sue the person who was personally responsible for the tort. Similarly, if you personally contracted for a service and you had clear knowledge that the company had no ability to fulfill that obligation, you can personally be held liable for the damage caused to the other party. They can sue you, and if they can prove you had personal knowledge of the company's financial position you may not be able to hide behind the LLC shield if you've damaged someone intentionally or negligently.
  • 10-01-2009, 08:00 PM
    Scott67
    Re: My LLC is Being Sued - What About Personal Liability
    Bubba, you may be able to do that which is exactly why I said "a very high likelihood of prevailing" rather than a guaranteed win. I don't understand why you think the statement of mine that you quoted is wrong.
  • 10-06-2009, 07:56 AM
    Bubba Jimmy
    Re: My LLC is Being Sued - What About Personal Liability
    I did not say it was wrong, I said it was not necessarily true and I outlined as clearly as I could the circumstances under which it would not be true. I'm not sure why you would take offense at my clarification, which was only intended to be helpful to the OP, not to tweak your nose or anything.

    However, since you brought it up, there are members of LLCs who are held personally liable for their personal actions all the time. I held a member of an LLC personally liable in a case I filed on behalf of my busines, suing the LLC and the sole member. That suit was successfully settled in my favor. Therefore, leading someone to believe that there is a "very high likelihood of prevailing" is not consistent with my own experience. A good lawyer will vigorously attack the members if an LLC has no assets, and they regularly and often make it stick.
  • 10-09-2009, 12:04 PM
    llchelp
    Re: My LLC is Being Sued - What About Personal Liability
    Thank you again. I was able to negotiate a settlement since the plaintiff had no case without the personal guarantee. As stated earier, I'm not looking to skip out on my debt, but when your company fails there is little you can do. I was hoping to get input on my settlement letter. I asked for a "complete release" to be include in my settlement, I have listed it below. I just want some feedback on if it is missing anything before I sign.

    "As a duly authorized agent of the above referenced client, we will agree to accept $1,000 as a full and final settlement of any and all claims of "Plaintiff Company Name". This settlement releases "My Name" of all obligations and liabilities to "Plaintiff" providing the check is received at "Lawyer Name" before 10/31/09. "

    My only concern is the release has my name and not my LLC, although my LLC is listed at the top of the document.
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