Setting up a company –whether through an LLC or corporation—is an important step for any business to reduce their own personal liability. Shielding personal assets through the use of a business entity is the primary purpose a company is set up in the first place. But many businesses fail to consider what happens when the day comes and they are actually sued. If my company is sued, can I represent my own company in Court?
The answer is generally, no. This may seem counter-intuitive. A sole-member LLC needs its sole member to function. But in the eyes of the law, you are not your company – it is considered its own entity (even if the IRS disregards it for tax purposes). An LLC cannot appear in court; only its attorney can. So if you were to appear in Court to defend and represent your LLC, suddenly you have opened yourself up to the unauthorized practice of law, which is a misdemeanor offense in Virginia. Or more worrisome for your business, the judge may determine that the entity is not present and enter a default judgment against your business because they are not considered present in court.
Helpfully, there are a few exceptions to this rule. Under Virginia Code § 16.1-81.1, if the amount in controversy is $2,500 or less, a small corporate entity is allowed to defend themselves. “Small” in this context means “held by no more than five persons and is not publicly offered or planned to be publicly offered at the time of the litigation .”
Additionally, in small claims court, which is designed for claims of $5,000 or less, does not allow attorneys. It further stipulates that an entity is allowed to be represented by its officers in small claims court.
For those amounts larger than $2,500.00 or small claims court, a business entity likely will need to be represented in court. If you need to know more about your courtroom rights and obligations as a business owner, please contact the knowledgeable attorneys at Way Law!