As a general rule, the legal form separates the company’s assets from the personal assets of its partners, but it does not eliminate all personal liability. Members of the company’s management must act diligently, honestly, and in the company’s interests. Their own breaches of duty can give rise to management liability, for example in the case of unlawful distributions, undisclosed conflicts of interest, or an improper delay in acting when the company is insolvent. Partners may also be held liable under a personal guarantee they have given or for a contribution that remains unpaid. Piercing the corporate veil means that, in exceptional circumstances, creditors can pursue a partner even though the company is generally liable for its debts. Neither simply holding an interest in the company nor the company’s inability to pay its debts is enough on its own. The key considerations are a specific abuse of the limited liability form, the partner’s conduct, and the company’s failure to satisfy the claim. The liability risks for management and partners therefore arise on different legal grounds and must be assessed separately.
Exceptions to Limited Liability When Choosing a Business Entity in Georgia
A company’s limited liability in Georgia does not protect its partners or management from claims arising from their own obligations or breaches of duty. Personal liability may arise in particular from guarantees, unpaid contributions, improper management conduct, or misuse of the company.
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