BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
A new development out of Atlanta this week. An investor has been held liable for the exceptionally poor conditions of his properties, even though they were held by an LLC that was not under his own name.
He argued that since he was not the owner or operator, but simply the manager, that he shouldn't be held responsible for the property conditions.
Check out this article about the verdict and this one about his arguments against being hld liable.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
11y
Generally speaking, LLC's are designed to protect your personal assets in the event someone pursues a claim against the business. It's not designed to protect someone from responsibility when it comes to a jailable offense. You can't put a LLC in jail. Some PERSON has to be held responsible, and it happens all the time. Ever watch American Greed? Presidents, CEOs, and owners of companies go to jail all the time for things they did on behalf of, or while operating under, their business.
Thanks for the back story, @Mark Graffagnino. I read a few of the articles, but I didn't come across that one. Not a really smart move on Warren's part.
@Rob Beland, thanks for the clarification. That is what I was trying to point out. His whole defense was that he didn't own them, the LLC did. An LLC is not a suit of armor, and it won't protect you from everything.
@Mindy JensenYou certainly started a firestorm with that post! Interesting stuff, and I think the takeaway is that an LLC is not bulletproof. The Courts will generally find a way to hold the right person responsible. Here is Colorado, it is clear that you can be held liable for your own actions even if acting on behalf of an LLC/Corp/etc. I wrote a blog post about it here. Follow the laws and you should be fine. This guy was a flagrant repeat offender, which is why he's going to jail.
Professional · Jacksonville, FL · Member since 2015 · 397 posts · 34 votes
11y
Poorly maintained properties could cause havoc and endanger the health of the public. But if there is some sort of criminal code violation due to the habitable condition of the property, they need to go after actual owners/officers of the LLC.
“...Warren was found guilty even though the houses were owned by limited liability corporations that were not listed under his name...”
Whose names then were on the LLC? Are they going after actual officers of the LLC also? If the articles of incorporation actually listed a different group of owners, where are they in regards to this action?
“...But witnesses testified that Warren was in charge of day-to-day operations at those businesses, and records showed he had an ownership interest...”
There is a difference between an employee and an officer of a company/LLC. Simply owning stock in some fortune 500 company you work for doesn't necessarily mean you get jailed for the crimes of the company or LLC per se. The exact nature of the ownership interest would have to be clarified.
“...prosecutors said Warren previously signed his name as president of West Star Holdings, which was listed as owner of the Rome Drive house for which he stood trial...”
If they are going after him based on his "having some ownership interest" in the rentals, they should be able to get some very concrete details regarding who the benefit of the LLC passes through to and who owns what in the LLC based onn the articles filed with the state.
