There are often questions surrounding liability in various types of business partnership. Today, we’ll examine a common partnership known as a limited liability company (LLC). If you start up an LLC and a member of your business commits wrongdoing, could you be on the hook for it?
To answer this question, let’s use an example scenario:
Business partner negligence
Let’s say you decide to start up a chiropractic clinic with your college roommate, Mark, and you make it an LLC. One day, you receive a call from an angry patient. She had received adjustments from Mark and now has a herniated disc. Mark never informed her of the possible complications that might result from the adjustment – which is a form of malpractice. What does this mean for you and your company?
Legal protections to your company
Because you have limited liability, you have no personal liability for the tort. The most you stand to lose is the amount you invested in the company.
Now let’s look at a variation on this scenario:
Because business is growing so rapidly, you and Mark decide to hire a third chiropractor, Susan, to join your team. Susan is not a partner of the LLC. If Susan commits malpractice, she will have personal liability for committing the tort.
In addition, the respondeat superior doctrine states that the LLC will also have personal liability. You and Mark will only have limited liability (as above) provided you did not play any role in contributing to the tort. However, if you neglected to properly train Susan, for example, this could be construed as negligence, and you could have unlimited, personal liability for Susan’s wrongdoing.
Understanding your rights in a business partnership can be complex. An experienced business litigation lawyer can help you make sense of it.