How Much Protection From Liability Do LLCs Provide?

By: Milt Thompson
BleekeDillonCrandall

One of the key enticements of forming an LLC is the limited personal liability of the members. A member, manager, agent, or employee of a limited liability company is not personally liable for the debts, obligations, or liabilities of the limited liability company, whether arising in contract, tort, or otherwise, or for the acts or omissions of any other member, manager, agent, or employee of the limited liability company. Furthermore, unless otherwise provided in a written operating agreement, a member or manager is not liable for damages to the limited liability company or to the members of the limited liability company for any action taken or failure to act on behalf of the limited liability company, unless the act or omission constitutes willful misconduct or recklessness.

An LLC does not release from liability any member, manager, agent, or employee of a limited liability company from the person's own negligent acts or omissions (as detailed infra under Section IX -Exceptions to Limited Liability). Furthermore, the liability protection afforded by an LLC does not extend to professionals practicing their profession, such as attorneys and physicians. The law regarding the relationship between a person rendering professional services and a person receiving professional services, including liability arising out of the professional services, is not affected by the formation of an LLC.

If an LLC is formed in Indiana, Indiana law will exclusively govern any conflict between Indiana law and the laws of other jurisdictions in regard to the liability of a member, manager, agent, or employee of an LLC. Furthermore, a member of an LLC may not be made a party to a proceeding by or against a limited liability company solely by reason of being a member of the limited liability company, except:

• when the object of the proceeding is to enforce a member's right against or liability to the limited liability company; or
• in an action brought under I.C. 23-18-8-1.