Owning a business offers many advantages, including limited liability — the ability to shield your personal assets from business debts and lawsuits. However, that protection is not absolute. Under certain circumstances, a lawsuit against your company could expose you personally, putting your home, savings, and financial security at risk.
In this post, we explain when personal liability can arise, how you can protect yourself, and what to do if you are personally named in a lawsuit.
Limited Liability: The Basic Rule
If your business is organized as a corporation or limited liability company, Florida law generally protects you from personal liability for the company’s obligations. In most cases, a creditor or plaintiff suing the business can only reach business assets — not your personal property.
However, this protection depends on properly maintaining the separation between you and your business. It can be lost if certain legal missteps occur.
When Business Owners Can Be Held Personally Liable
There are several common scenarios where business owners may face personal exposure:
- Personal Guarantees: If you signed a personal guarantee for a loan, lease, or contract, you are personally liable regardless of your company’s structure.
- Piercing the Corporate Veil: If you treat the business as your “alter ego” — for example, by mixing personal and business funds — a court may allow a plaintiff to pierce the corporate veil and sue you individually.
- Tortious Conduct: If you personally commit a wrongful act, such as fraud or negligence, you can be held individually responsible.
Piercing the Corporate Veil in Florida
Florida courts are hesitate to allow plaintiffs to pierce the corporate veil. It is not enough to simply allege unpaid debts. To succeed, a plaintiff must prove:
- That the corporation or LLC was used fraudulently or for an improper purpose; and
- That the business was a mere instrumentality or alter ego of the owner.
Maintaining proper business practices is key to preserving the liability shield.
How to Protect Yourself
To minimize the risk of personal liability:
- Maintain separate finances: Use distinct bank accounts and credit cards for business and personal transactions.
- Follow corporate formalities: Keep proper minutes, resolutions, and operating agreements.
- Use business titles: Always sign contracts on behalf of the company, not personally.
- Maintain adequate insurance: Commercial liability insurance can provide critical protection against lawsuits.
- Avoid personal guarantees when possible: Negotiate contracts that rely on the business’s credit, not your own.
What to Do If You Are Personally Sued
If you are named individually in a business lawsuit:
- Act quickly. Florida law typically requires a formal response within 20 days after service.
- Consult an experienced business litigation attorney. Early strategic advice can help you challenge improper claims, preserve defenses, develop counterclaims, and potentially dismiss the case against you.
Conclusion
While limited liability entities like corporations and LLCs offer important protections, those protections are not absolute. Mistakes in business management or personal conduct can expose business owners to personal lawsuits.
If you have been personally sued or are concerned about protecting your assets, contact our office today. Our attorneys are ready to evaluate your situation, explain your options, and provide a strong, strategic defense.