I Can't Be Liable, I'm Incorporated! The law of Agency Revisited!
Business Owners who incorporate their business, or create a Limited Liability Company, usually have a misconception that they have immunity to liability. Company officers, agents for the company, are responsible for their own misdeeds.In a recent case the appellate court in New York State found the sole owner of the plaintiff corporation personally responsible for the failure of the company to comply with certain court orders, even though he was not a party to the action.
The court held: Although appellant Qasemi is not a party to the action, he is the sole owner and principal of plaintiff, and can be punished for plaintiff's disobedience of the order and judgment. While Qasemi was not personally served with these dispositions, it is undisputed that plaintiff was served and was aware of the mandates contained therein. It defies credulity that Qasemi himself was unaware of the orders ... Furthermore, since there were no issues of fact to be resolved at a hearing, it was proper for the court to make a finding of contempt without a hearing...
So much for limited liability. That concept of limited liability only goes so far. An officer is an agent of their company, and as such is not liable for contracts entered into on behalf of the company so long as the agent informs the other party of the agency and the identity of the principal. Failure to do so leaves the agent liable for the debt. In this case the court didn't hesitate to nail the agent because the agent caused the principal to violate the court's order.
This case is a good lesson for all.
