In New York commercial litigation, business owners, executives, and managers can face personal liability despite operating through a corporation or LLC. Courts may allow claims against individuals based on contract terms, personal conduct, or misuse of the business entity. Understanding when personal exposure exists helps you respond quickly and protect both business and personal assets.
When Can Business Owners Be Personally Liable in New York?
New York law generally shields business owners from personal liability when they operate through properly formed corporations or LLCs. However, that protection is not absolute. Courts look closely at the individual’s role in the dispute and whether personal conduct justifies liability.
Personal exposure most often arises when an owner directly participates in wrongful acts, personally guarantees business obligations, or fails to respect the legal separation between themselves and the entity. In closely held businesses—common throughout Nassau County, Suffolk County, and New York City—overlapping ownership and management increase this risk.
How Courts Pierce the Corporate Veil in New York
Piercing the corporate veil is one of the most common strategies plaintiffs use to pursue individuals. New York courts apply this doctrine cautiously, but they will permit it when the facts show abuse of the corporate form.
Courts typically examine whether the business was dominated by an individual and used to commit wrongdoing. Factors may include commingling personal and business funds, failing to observe corporate formalities, undercapitalization, or treating company assets as personal property. No single factor controls. Instead, courts evaluate the totality of the conduct, making these claims highly fact-specific and litigation-driven.
Personal Liability for Officers, Directors, and LLC Managers
Officers, directors, and managers can face personal liability even when veil-piercing is not at issue. New York law allows claims against individuals who breach fiduciary duties owed to the company, shareholders, or members.
These disputes often involve allegations of self-dealing, misuse of company funds, concealment of material information, or decisions made in bad faith. In shareholder and partnership litigation, plaintiffs frequently name executives individually to expand remedies and increase settlement pressure early in the case.
How Personal Guarantees Create Individual Liability
Contract disputes are a common source of unexpected personal exposure. Many business owners sign personal guarantees tied to commercial leases, loans, vendor agreements, or construction contracts without fully appreciating the consequences.
In New York, courts enforce guarantees according to their terms. Even if the underlying dispute concerns the business entity, a valid personal guarantee can expose the individual signer to direct financial liability. These issues often surface at the outset of litigation, making contract review and early motion practice critical.
Business Tort Claims That Bypass Corporate Protection
Certain tort claims allow plaintiffs to pursue individuals regardless of business structure. These claims focus on personal participation rather than corporate status.
Common examples include fraud, intentional misrepresentation, tortious interference with contracts, defamation, and unfair competition. Plaintiffs frequently plead these claims alongside breach-of-contract allegations to pursue damages directly from individuals and apply leverage during litigation.
Regulatory and Statutory Claims That Expose Individuals
Personal liability may also arise through regulatory or statutory enforcement. New York labor laws, tax obligations, and certain industry regulations allow agencies to pursue individuals who exercise operational control over a business.
These matters often begin as investigations and later evolve into civil litigation. When regulators identify individual responsibility, that finding can significantly affect litigation strategy, settlement posture, and potential exposure.
How to Limit Personal Exposure Before Commercial Litigation
Reducing personal liability risk starts with maintaining a clear separation between personal and business affairs. This includes observing corporate formalities, keeping finances separate, documenting decisions, and carefully reviewing contracts before signing.
When disputes arise, early legal review is equally important. Identifying personal exposure at the outset enables strategic responses, targeted defenses, and the avoidance of actions that may strengthen claims against individuals.
Why Personal Liability Changes Commercial Litigation Strategy
When personal assets are at stake, commercial litigation takes on added urgency. Defense strategies often prioritize early dismissal motions, narrowing claims, and separating individual liability allegations from entity-level disputes.
Negotiation and settlement dynamics also change when individuals are directly exposed. Understanding these pressures helps business owners and executives make informed decisions that protect both professional and personal interests.
Protecting Personal Assets in New York Commercial Disputes
Personal liability claims can dramatically raise the stakes in commercial litigation. At Kohan Law Group, we represent business owners, executives, and professionals facing individual exposure in New York commercial disputes. From our offices in Manhasset and Manhattan, we develop strategic defenses, challenge overreaching claims, and protect your business and personal assets. Contact Kohan Law Group today to discuss your situation and your legal options.