Also known as: personal liabilities · personally liable · individual liability
Written by attorneys · grounded in primary & secondary sources — see below
Direct responsibility of an individual for debts or obligations of a business entity or trust. An individual faces such liability when the individual's own acts or conduct create responsibility or when a court disregards the entity form.
Prism Analytics issues shares to Pablo Perez. A supplier later sues the corporation for unpaid invoices. The court holds that Pablo faces no personal liability because he is merely a shareholder and has not engaged in conduct that would create direct responsibility.
Patriot Insurance forms an LLC to operate its business. A customer obtains a judgment against the LLC for a denied claim. The court rules that Piper Patel, a member, bears no personal liability for the judgment solely because of her membership status.
Select any source to read its text and confirm it supports the definition.
Precision Tools admits Pierce Patterson as a general partner in a limited partnership. A supplier sues for goods delivered before Pierce joined. The court determines that Pierce has no personal liability for the preexisting obligation.
Pinnacle Holdings admits Portia Price as a partner. A bank seeks repayment of a loan made to the partnership before Portia joined. The court concludes that Portia incurs no personal liability for the earlier debt.
Priscilla Parks forms an undercapitalized corporation that ignores formalities and serves only to shield her from personal exposure. A tort victim sues after the corporation causes injury. The court disregards the corporate form and imposes personal liability on Priscilla.
Phoebe Park, acting as trustee, signs a supply contract on behalf of a trust and discloses her fiduciary role. The supplier later sues for nonpayment. The court holds that Phoebe bears no personal liability on the contract.
A shareholder faces personal liability only when the shareholder's own acts or conduct create direct responsibility or when a court pierces the corporate veil under a two-prong test requiring both unity of interest and sanctioning of fraud or injustice.
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No. The failure of a limited liability company or partnership to observe formalities is not by itself a ground for imposing liability on a member, manager, or partner for the entity's debts.
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No. A person who becomes a partner or general partner is not personally liable for debts or obligations incurred before the person joined, whether in a general partnership, limited partnership, or limited liability limited partnership.
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A trustee is not personally liable on a contract properly entered in a fiduciary capacity if the trustee discloses that capacity in the contract, unless the contract provides otherwise.
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…in rem." The effect of a judgment in such a case is limited to the property that supports jurisdiction and does not impose a personal liability on the property owner, since he is not before the court. In Pennoyer 's terms, the owner is affected only "indirectly" by an in rem judgment adverse to his interest in the property…