User:Cajharsh/sandbox

= Legal liability =

Liability in Business
In commercial law, limited liability is a method of protection included in some business formations that protect an investors' and/or owners' assets in the case that the company experiences financial troubles and declares bankruptcy. Forms of businesses that offer the limited liability protection include limited liability partnerships, limited liability companies, and corporations. Sole proprietorships and partnerships do not include limited liability.

An exception to limited liability exists called "piercing the corporate veil." This is when a court decides to make a corporation's shareholders and/or directors liable for the corporation's debts. Courts generally try not to utilize this exception unless there have been serious transgressions. Limited liability aids entrepreneurs, businesses, and the economy grow and innovate. The exact test a court will use to determine if the veil needs to pierced vary by state in the United States, but generally courts will look to see if there is a separation between the company's and its owners' affairs, the company's actions were fraudulent, and if the company's creditors were subject to an unjust cost.

For sole proprietorships and general partnerships, the liability is unlimited. Unlimited liability means that the owner(s) of the business have the full responsibility of assuming all the business's debts. This can include seizure of personal assets in the face of bankruptcy and liquidation.

There is a form of liability that exists between employers and their employees. This is called vicarious liability. For it to apply, one party has responsibility for a third party, and the third party commits an unlawful action. An employer may be held liable for the actions of an employee if it is unlawful (i.e. harassment or discrimination) or the employee's negligent actions while working causes damages to property or injury.