Member Immunity From LLC Liability Varies by State

LLCs and corporations limit the liability of their owners. LLC members and corporate shareholders risk only their capital contribution. Many people understand the concepts of “piercing the corporate veil” and “alter ego liability.” Do they apply to LLCs? Recent case law provides some answers.

The LLC concept was introduced in Wyoming in 1977. The Uniform Law Commission promulgated the Uniform Limited Liability Company Act in 1996. Each state and the District of Columbia have now enacted statutes.

In South Carolina, a member was judged liable for negligent supervision of an LLC project. On appeal, the member argued that the Uniform Limited Liability Company Act immunized him. The State Supreme Court upheld the judgement, relying on common law principles that hold a tortfeasor liable for his own wrongs, regardless of whether pursued on behalf of another.

A Maryland court held an LLC manager liable for personal injuries resulting from lead paint exposure arising out of the negligent maintenance of real property owned by the LLC. In that case, the injured party never entered into a lease with the LLC and did not have a legal right to occupy the property.

A Wisconsin court applied the language of the Wisconsin LLC statute and found that members cannot be personally liable for torts they commit when acting as an agent of the LLC. Wisconsin would appear to attach personal liability only when the member is acting outside his or her capacity.