Personal Liability May Still Exist for LLC Members, Despite the General Shield from Liability.
In a previous blog article, “Louisiana Supreme Court holds that an individually licensed contractor is not a “professional” within the meaning of an exception to limited liability for LLC members,” I discussed a recent case which held that a contractor could not be found personally liable under the “breach of professional duty” exception in the LLC statute. However, it is important to note that there are other situations which may lead to personal liability, despite LLC status.
The Fourth Circuit ruled on a case where the contract was drafted on the equivalent of company letterhead but the preamble of the contract and the signatory pages indicated that the contract may have been with individual LLC members. The Court specifically noted that the signature lines for the LLC members had no indication that they were signing on behalf of the LLC. As a result, the Court held that the contract was unclear as to the true contracting parties and denied the Summary Judgment Motion filed by the members. Hohensee v. Turner, 2013-0615 (La. App. 4 Cir. 1/22/14), 133 So. 3d 141, 143 (La. Ct. App. 2014).
Best Practices for Acting on Behalf of an LLC
Thus, when acting in your capacity as a member of an LLC, the best practice is to:
1) Write all contracts drafted by your organization on company letterhead;
2) Ensure that all signature lines clearly note that the contract is with the LLC not the individual member who endorses the contract (Ex. Mr. X on behalf of ABC, LLC not Mr. X); and
3) Ensure that any provisions which list the contracting parties list the LLC not the individual members. (Ex. “This agreement is made between ABC, LLC and Mrs. Y” not “This agreement is made between Mr. X and Mrs. Y”).
Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.