contract-law business corporate-law incorporation limited-liability-company
Is it a myth that a single owner LLC protect the owner&#39;s personal assets?
<p>I own 100% ownership of an LLC. I started this LLC because everyone gave me advice that if the company is sued, the banks won't go after my car, my house or etc.</p>
<p>As I dig deeper into the legal framework I realized that in many cases the directors are always being personally implicated in tort law suits. Some have to pay the lawsuits for the rest of their lives. Some have their assets confiscated.</p>
<p>A company always acts on the direction of it's directors and a tort lawsuit can be filed on the directors. It becomes more incumbent if there is only one director of the company.</p>

<p>If the company makes a contract, and as a result of that contract it owes more money than it has, then the company goes bankrupt and the owners and directors can walk away from it. This covers the owners/directors in cases of ordinary business contracts.</p>
<p>However if an employee (including an owner or director) does something sufficiently harmful then under the law of torts they can be personally liable as well as the company. Examples are negligence and fraud; if you build someone's new roof while acting as an employee and the roof leaks then its likely to be the company on the hook for damages. However if you misrepresented your qualifications or acted negligently then you might well be personally liable.</p>
<p>This is all very general. Details are going to be specific to your jurisdiction.</p>
<p>So the answer is that having a company is certainly better than making every contract in your own name, but its not complete cover.</p>
<p>You can probably get insurance if this is a concern, but its likely to be expensive.</p>

<p>First, the case of a badly run business, that just doesn’t make enough money. Banks won’t lend you money so there will be nothing to pay back. Suppliers will tend not to deliver without immediate payment, again nothing to pay back. If you extracted money from the company, you may have to pay it back. In the UK, it is illegal to pay dividends if you then can’t pay your bills, so you’d have to repay them. Loans to the owner must be repaid. Taking money out of the till gets you into trouble and has to be repaid. Salary will likely be safe.</p>
<p>Now if something bad goes wrong: If the company causes damage that leads back directly to you, then you will be personally liable. Assume the company had two owners. If you make a bad decision the other owner might say that this wasn’t the company’s decision, but your personal decision.</p>
<p>Look at “breach of contract”. You have a removal company. Not removing furniture on the promised date could cost a lot of damages. If your removal truck breaks down, your company is liable. You are personally safe. If you find out the customer is the person who stole your girlfriend 30 years ago and stop the removal, that is also breach of contract, but you would be personally responsible.</p>
<p>With vicarious tort liability, we can assume that a company or company director wouldn’t commit a crime, but that a crime would be because of a personal decision if the owner. So the owner would be personally liable. (That’s also a situation where a second owner would insist that you pay damages personally, and not the company).</p>
