Individuals like to sue, and most New Hampshire people who personal and run sole proprietorships are potential targets of claims from their prospects, suppliers, their very own staff and impartial contractors, and different third events. Should you personal a enterprise in New Hampshire, the simplest solution to shield your self in opposition to such a declare is to run your online business as a single member LLC, because the New Hampshire LLC Act supplies you with safety within the type of a defend of authorized legal responsibility.
Nevertheless, there are conditions the place an LLC Legal responsibility Defend will shield you from these claims and different conditions the place it won’t. Each New Hampshire particular person who owns a single member LLC ought to have a minimum of a fundamental understanding of each forms of conditions. Since a number of hundred and probably a couple of thousand folks studying this column personal or may probably personal New Hampshire Sole Proprietorship LLCs, on this column and in a number of subsequent columns, I’ll present a plain English clarification of those conditions.
The start line for as we speak’s article is essentially the legal responsibility safety provisions of the New Hampshire LLC Act, that are set out in part 23 of that act. This part supplies, in essence, that the liabilities of an LLC shall be solely these of the LLC itself, and it supplies that no member or supervisor of the LLC shall be chargeable for such money owed merely as a result of they’re a member or managers. So, for instance, if an worker of your LLC injures a 3rd social gathering whereas working on your LLC, you’ll usually not be chargeable for that damage, due to your New Hampshire LLC authorized legal responsibility defend.
Nevertheless, nothing within the legislation is easy, and there are ten major forms of conditions during which the Part 23 legal responsibility defend won’t shield members or officers of New Hampshire LLC. The 4 most vital conditions are briefly described beneath. To be concrete, I’ll assume that every of those conditions entails a single-member New Hampshire LLC known as XYZ, and I’ll assume that the member and director of XYX is a hypothetical individual named Mary Jones.
1. Direct Legal responsibility of Member or Supervisor. Part 23 won’t shield a member or supervisor of the LLC if a 3rd social gathering makes a declare in opposition to the LLC based mostly on the direct private misconduct of the member or supervisor.
Instance. As a part of XYZ’s enterprise, Mary drives an XYZ truck and carelessly hits and injures John Jones, a pedestrian. Resulting from her private negligence, Mary will probably be personally liable to Jones for her damage regardless of her single-member LLC legal responsibility defend.
2. Vicarious Legal responsibility of Member or Supervisor. Part 23 won’t shield LLC members or officers if they’re not directly chargeable for a 3rd social gathering declare in opposition to an LLC.
Instance. XYZ owns a industrial constructing and leases it to ABC, a New Hampshire producer. Mary engages a 3rd social gathering, Steven Smith, to handle the constructing and, particularly, to make sure the bodily safety of holiday makers. Mary doesn’t adequately examine Smith’s competence and is subsequently unaware that guests to different industrial buildings he manages have been bodily harmed by unsafe situations. A customer to the ABC plant within the XYZ constructing is injured as a consequence of unsafe situations. Smith will probably be personally chargeable for this damage, but additionally Mary for her negligence in hiring Smith.
3. Pierce the veil. Part 23 won’t shield LLC members or managers if their LLC is indebted to a 3rd social gathering and the third social gathering succeeds in bringing a declare in opposition to the member. A sail piercing declare is a declare that, no matter any authorized legal responsibility defend, an LLC member must be held chargeable for an LLC debt due to elementary fairness – for instance, as a result of the LLC member by no means bothered to get legal responsibility insurance coverage for the LLC. Due to the possibly main threat veil-piercing poses to New Hampshire single-member LLCs, I can’t present an instance of veil-piercing right here; as an alternative, I’ll focus on the doctrine of piercing the veil intimately in a later column.
4. Legal responsibility underneath non-LLC statutes. Part 23 won’t shield LLC members if they’re personally liable for his or her LLC’s money owed underneath non-LLC legislation, resembling a federal tax legislation holding enterprise house owners personally chargeable for taxes that their enterprise doesn’t pay.
John Cunningham is an lawyer licensed to observe legislation in New Hampshire and Massachusetts. He’s authorized counsel for the legislation agency McLane Middleton, PA. Contact him at 856-7172 or [email protected] His web site is llc199a.com. To entry all of his Legislation within the Market columns, go to concordmonitor.com.
Legislation within the Market is a authorized recommendation part. It airs weekly within the Sunday Enterprise part. The writer is a lawyer at Harmony and isn’t a employees member of the Monitor.