Stephen Kaplan, P.C.

An LLC Does Not Completely Eliminate Risk Of Personal Liability

One of the key reasons individuals form limited liability companies (LLC) is to protect themselves from personal liability. However, business owners should never assume that by creating this type of business entity they have no risk of personal liability for their actions. A recent case decided by the Texas Supreme Court on February 23, 2018 highlights this fact.

Liability For Environmental Law Violations

In the State of Texas v. Bernard Morello, the Texas Supreme Court held that the sole manager of a Texas LLC in his individual capacity can be held liable for the business’s failure to comply with Texas environmental laws.

The court stated, “federal and state courts have consistently rejected the position that where an environmental statute applies to a ‘person,’ corporate officers can avoid individual liability for violating the statute if they personally participated in the wrongful conduct.” Thus, the Texas Supreme Court indicated that the same rules of law apply to those individuals who run or operate a Texas LLC, whether they are managers or members.

This Is Not The Only Example

This decision should serve as a reminder to the organizers of limited liability business entities that there are many statutes that exist under federal and state law that may impose personal liability on the individual entrepreneurs who organize the business entity.

When forming an LLC or any other business entity, the organizer must take care to choose the option that provides the appropriate protections, and to be fully aware of the true extent of those protections.

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