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If a sole trader is responsible for all the debts and liabilities of the his/her company, they can be sued and can sue its own name …right?
Why can LLC’s sue and be sued in its own name when they are owned by shareholders who don’t carry the debts of the company. Unless they are talking about the directors of the firm?
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Rong !,Being a sole trader is the simplest way to run a business, and does not involve paying any registration fees, but you must register as self employed. Keeping records and accounts is straightforward, and you get to keep all the profits. The difference is that you are personally liable …
Even though a limited liability company offers protection for the owners against some forms of debt, it does not ensure the company and the owners will not face civil court action. It is no more difficult to file suit against an LLC than any other business structure. A lawsuit can be brought against any legal entity for any reason at any time. Companies — including sole proprietorships, limited partnerships and limited liability companies — are routinely sued for torts both merited and frivolous. As a result, many small companies retain attorneys in an effort to protect themselves against suits filed without cause.
With a sole trader, legally there is no company. A sole trader may have trading name, but legally their assets and liabilities are indistinguishable from the person. Therefore the sole trader can be sued in their own name – indeed their ‘company’ cannot be sued as it doesn’t exist!
With an LLC, the company is a separate legal entity in its own right. The shareholders own the business, but they don’t control its activities directly. The directors control the company, on behalf of the shareholders. If the company does something, its the company that can be sued, even though it is directed by people.
Under certain circumstances the veil of incorporation can be lifted and directors can be sued.
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