Andrews and Baker form a limited liability company (LLC) for the purpose of running an organic foods grocery store. Each invested $100,000 in the restaurant to get it started. One year later, Donna is shopping at the grocery store, trips over a banana peel on the floor left by an unknown person, and breaks her arm in the resulting fall. If Donna sues the LLC,

Question

BlackTom AI · Accepted Answer

The scenario involves an LLC that operates a grocery store and a customer (Donna) who is injured on the premises due to a hazard (banana peel). Now, let’s evaluate each answer choice in light of how liability works for LLCs.

Option 1: 'the LLC has potential liability.' This is the correct framing. In most premises liability cases, the entity that owns or operates the business (here, the LLC) can be liable for injuries to customers if a dangerous condition exists on the premises and the business failed to exercise reasonable care to keep the premises safe. The LLC, as the owner/operator, is the tortfeasor in the sense of the liability being pursued against the business entity for negligence in maintenance or inspection.

Option 2: 'the members can have personal liability.' Generally, members of an LLC are not personally liable for the debts or torts of the LLC. Personal liability for members can arise only in specific situations, such as personal involvement in causing the tort, piercing of the corporate veil due to improper conduct (fraud, commingling assets, undercapitalization, etc.), or a personal guarantee. Absent these exceptional circumstances, the members’ personal assets are protected from LLC business liabilities. Therefore, this option overstates the default risk to individual members in a standard premises liability scenario.

Option 3: 'no one has liability because Donna should have been more careful.' This is a mischaracterization. While contributory or comparative negligence might reduce damages if Donna bears some fault, it does not categorically eliminate the LLC’s liability. Duty of care, breach, causation, and damages are assessed to determine fault. The premise owner has a duty to maintain safe conditions; a trip caused by a hazard can still result in LLC liability depending on evidence of safety practices, warnings, and maintenance.

Option 4: 'the LLC and members both have liability.' As a general rule, the LLC bears liability for its business operations, while members are not automatically liable for LLC torts. Dual liability to be pursued against both entity and members would require piercing the veil or showing personal involvement or guarantees. Without such showing, the typical result is liability against the LLC alone (or against the party actually at fault in their personal capacity if applicable), not automatic joint liability of both LLC and members.

In summary, the core point is that the LLC is the entity at issue for a premises-related injury, and the default expectation is that the LLC has potential liability. Personal liability for members is not automatic and would require specific conditions; claims against both the LLC and members typically depend on veil-piercing standards or personal fault, which are not established in the described scenario.

ACCT:4300:0001 Fall25 Examination #3 (final exam) - Accounting Ethics and Law- Requires Respondus LockDown Browser

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