If someone sues a defunct LLC that I was a partner in for product liability, can the corporate veil be broken and can I then be personally sued?

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If someone sues a defunct LLC that I was a partner in for product liability, can the corporate veil be broken and can I then be personally sued?

The business is defunct and no longer has product liability insurance.

Asked on June 12, 2012 under Business Law, Wisconsin

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

There are certain tax debts for which managing members are responsible. And if you guaranteed a debt personally, clearly you could be sued. Otherwise, as you note, you could generally only be sued if the "corporate veil" could be pierced. This is a very rare occurence, and requires essentially a showing that 1) you used the LLC to defraud creditors--not merely that you could not pay all your debts or obligations, but that there was specific fraudulent intent; or 2) there was no meaningful distinction between you and the LLC (e.g. comingled funds), so there is no reason to "respect" the LLC. These are obviously not typically the case.

Also: if you personally committed a fraudulent or tortious act while working for your LLC, you could be sued for that fraudulent act--for example, if you personally falsified documents (e.g. safety data, ordered unsafe parts, incorrect labeling) which led to the product-related injuries, that could potentially provide basis for personal liability.


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