Can Owners or Shareholders be Held Personally Liable if Their Company is Sued?

Most business owners and shareholders think they are immune from personal liability if their business is sued. This is not necessarily true. Under various circumstances, it is quite possible for someone not only to sue your business, but also to seek damages from the shareholders themselves. Such an act is called “piercing the corporate veil,” and it can be used to hold shareholders liable for damages done by their company.

In this short animated video, we’ll show how bad business practices can blur the line between personal and business liability. Our character, David, who inherited his family’s business from his parents, got into trouble by using company credit cards and bank accounts for personal use, and vice versa. When his company was one day sued for breach of contract, the line between his personal and business finances became so blurry that his personal assets were targeted in the lawsuit. David risked losing everything.

In sum, the more the line between shareholder and business finances is blurred, the easier it is for someone to sue shareholders personally. If a shareholder does not respect the legal separation between him/herself and the business, then why should a court?

Though there are indeed laws that protect shareholders from business lawsuits, there are many exceptions. Don’t think your assets are 100% immune if your company is sued. It is very possible you and your company can be sued simultaneously if you’re not careful with how you run your business.

For more information on this topic, see our blog at: 

https://www.castletonlaw.com/blog/eng...

If you have any questions, leave comments below! We will regularly post animated videos on various legal topics. 

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About us: Castleton Law Group was founded in 1986 and is located in Southern California. We specialize in civil, divorce, business, and probate litigation, and we have helped thousands of clients over the past 34 years. If you need legal counsel or would like information on our legal services, please contact us.