Answer FileBusiness Law

Can I sue a business owner personally in California?

The answer, cited

Usually the corporation or LLC alone is liable for its obligations (members and shareholders are shielded (Corporations Code section 17703.04)), but owners answer personally on a signed guaranty, for their own torts or fraud, and under the alter ego doctrine when the entity is a shell used to work an injustice.

The default is separation: a corporation or LLC is its own legal person, and its debts are not its owners' (for LLCs, Corporations Code section 17703.04). Three routes pierce that separation. First, a personal guaranty: landlords and lenders routinely require one, and it makes the owner a direct contract party. Second, personal conduct: an owner who commits fraud or another tort is liable for it regardless of the entity, because incorporation shields status, not conduct. Third, alter ego: courts disregard the entity when there is such unity of interest that separateness has ceased (commingled funds, undercapitalization, the entity as a mere conduit for personal dealings), and honoring the form would sanction a fraud or promote injustice. Section 17703.04(b) applies the doctrine to LLCs, though failure to hold member meetings is not itself a factor. Alter ego can be pleaded in the case or raised after judgment, where courts may amend a judgment to add the controlling individual as a debtor.

Authority: Cal. Corp. Code § 17703.04

Source: Cal. Corp. Code § 17703.04 · Checked: · Maintained by the California Attorney Registry from official State Bar of California records. Legal information, not legal advice.

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