Delaware Incorporation And Owner Liability
Most clients who walk into a lawyer’s office to start a business assume that if they become incorporated or form a limited liability company, they’ll be protected from personal liability. That’s not entirely correct. Let’s look at the following example.
You’ve decided to start a small limousine service. You’ll be one of the drivers, and you plan to hire two other drivers who will be employed by your corporation. If one of your drivers is negligent and crashes into another car, he will be personally liable for the harm he causes. In addition, your corporation will also be held legally responsible for the injuries because an employer is responsible for the negligence of an employee if he was acting within the scope of his employment at the time of the accident. That’s because of a well recognized doctrine called “respondeat superior,” or “vicarious liability.” The good news is that as the owner of the company, you yourself will have no personal liability for the injuries caused by the employee.
Now let’s take the same example, but now you’re the driver of the limo that gets into an accident and causes injuries. In this situation, you will be held personally liable. Why? It’s because a person is always legally responsible for any injuries that are caused by his negligence. Just like the employee who was driving in the first scenario, this time you were the driver, you were negligent, and your negligence resulted in someone getting hurt. In the first scenario, you escaped liability because (1) you weren’t negligent, and (2) you weren’t the driver’s employer (the corporation was the employer).
