Can LLC Members Be Personally Liable for Acts of LLC?

By: Todd A. Jones, Attorney at Law


Many clients ask about the effectiveness of creation of an LLC as a protection in litigation.  A recent North Carolina Court of Appeals ruling is instructive.

In the case, Dacat, Inc. v. Jones Legacy Transportation, LLC, the Plaintiff, Dacat, Inc. tried to pierce the veil of the LLC and hold the LLC members personally liable for the LLC’s breach of contract.  The Court of Appeals ruling held that for an LLC member to be liable for acts of the LLC, its must be proven that the member used their control over the LLC to commit fraud or wrong, to perpetuate the violation of a statutory or legal duty, or to engage in a dishonest or unjust act in contravention of the opposing party’s legal rights.

This element the “mere instrumentality” rule can be satisfied with proof that the LLC was formed for the sole purpose  of entering into a contract and at the same time insulating the member or members from the liability under the contract.

The court found that the LLC – Jones Legacy Transportation, LLC – was created a year before it contracted with Dacat, Inc.  and Dacat, Inc. was not the only party that Jones Legacy was contracted with for services.  The ruling was that the LLC was not created or the sole purpose of entering into the contract with Dacat, Inc. and of Jones Legacy was not a mere-instrumentality of the individual members of the LLC.

Anderson Jones attorneys assist all types of business owners on a variety of matters. If you have a question regarding this topic or any other business matter, please contact our attorneys by email or phone at (919) 277-2541.