Personal Liability

Being "personally liable" means that a plaintiff who wins a court judgment against your business can satisfy it out of your personal assets, like your bank account, home, or automobile simply because of your status as an owner of the business. A common reason for a plaintiff to win a judgment against a business is that an employee or other agent of the business committed an unlawful action that injured her. As a general matter, then, personal liability means that your personal assets are exposed if one of your co-owners or employees commits an unlawful action that injures someone, such as writing a defamatory article or post.

Certain kinds of business entity expose you to personal liability for the unlawful actions of others participating in the business. Sole proprietors are personally liable for the unlawful actions of their employees committed in the scope of their employment. [Partnership|Partners] are personally liable for the unlawful actions of their partners and employees committed in furtherance of the business. Individuals operating in an informal group may be held personally liable for the actions of others in the group if the group is deemed an informal partnership or an employer-employee relationship is found.

Other forms of business do not expose you to personal liability for the unlawful actions of others who participate in the business. If you form an LLC, a corporation, or a nonprofit organization you generally will not be held personally liable for the actions of others taking part in the business.

No form of business, however, can insulate you from personal liability for your own misconduct. If you write a defamatory article or blog post, for example, a victorious plaintiff could satisfy the judgment out of your personal assets, regardless of what type of business you adopt.

While personal liability is an unpleasant prospect under any circumstances, the larger your business or nonprofit enterprise is, the more intolerable the risk. The major liability risk for most citizen media sites or blogs is getting sued for defamation. Other significant risks includes legal claims for invasion of privacy, copyright and trademark infringement, and violations of trade secret laws, all of which could arise out of the act of publishing content online. If your business or nonprofit enterprise involves just you creating content and publishing it, then personal liability is not such a serious problem because no one else is publishing material and you're liable for your own content in any event. If your business or nonprofit enterprise is bigger, and involves a number of different people publishing content online (whether they are co-owners of the business or employees), then personal liability for their actions is a more significant problem.

A caveat: If your business will be engaging in significant activities other than publishing material online, or if the business will take on taking on significant debt in order to finance its operations, then the disadvantage of personal liability grows in significance, regardless of how many other individuals are involved.