In a lawsuit against an LLC, its individual member may be held personally liable through which action?

In a lawsuit against an LLC, its individual member may be held personally liable through which action?

• A. Intentional Wrongdoing
• B. Personal Negligence
• C. The Piercing of the Corporate Veil
• D. Breach of Contract

Answer: (C)

Piercing the corporate veil is the mechanism that lets a court disregard the LLC’s separate legal existence and hold its members personally liable. This occurs when the LLC is used to perpetrate fraud or injustice, or when there’s unity of interest and improper conduct such as commingling assets, undercapitalization, or failure to follow formalities. Once the veil is pierced, the members can be treated as the “alter ego” of the LLC and respond personally for the LLC’s debts or obligations. The other options describe actions tied to the individuals’ own conduct or to contract obligations of the LLC, but they do not by themselves override the LLC’s limited liability through the veil-piercing doctrine.

Piercing the corporate veil is the mechanism that lets a court disregard the LLC’s separate legal existence and hold its members personally liable. This occurs when the LLC is used to perpetrate fraud or injustice, or when there’s unity of interest and improper conduct such as commingling assets, undercapitalization, or failure to follow formalities. Once the veil is pierced, the members can be treated as the “alter ego” of the LLC and respond personally for the LLC’s debts or obligations. The other options describe actions tied to the individuals’ own conduct or to contract obligations of the LLC, but they do not by themselves override the LLC’s limited liability through the veil-piercing doctrine.