NNB2B | April 2015 | 37www.newnorthb2b.com

Professionally Speaking

Buying for Your Business: a Cautionary Taleby William E. Fischer of Davis & Kuelthau, s.c. 920.232.4843

William Vander Pas bought the Komp Bros. Market in Hartford in 2008, incorporating an LLC to shield his personal assets from liability in case creditors came calling.

A few years later, that situation occurred when a vendor, Gabbei Wholesale Meats, sued for outstanding balances. However, rather than sue the corporation, Gabbei sued Vander Pas personally. Vander Pas, asserting he was running the business through his LLC, denied liability. Harold Gabbei Wholesale Meats, Inc. v. Vander Pas, No. 2014 AP 693 (Wis. Ct. App., Jan. 28, 2015).

The problem was that – as the court concluded – Vander Pas did not sufficiently disclose the LLC’s existence to Gabbei. In Wisconsin, while agents are not personally liable for debts incurred on behalf of a disclosed principal, they can be

held liable when the principal’s corporate status is not fully disclosed. The agent is responsible for making an adequate disclosure, and failure to do so leads to personal liability.

At trial, Vander Pas argued he provided sufficient disclosure, asserting he gave a form he created to Gabbei’s delivery driver with corporate information on it. He also said he made payments to Gabbei in envelopes with his LLC’s return address. The court rejected his arguments, holding that even if Vander Pas’s testimony was true, it still did not constitute sufficient notification of corporate status, and Vander Pas was personally liable for the debt.

Mr. Vander Pas’ situation serves as a cautionary tale. It is not enough merely to incorporate your business to shield yourself from personal liability. You have to make sure the people you’re doing business with know that as well. Using a form for that purpose is all well and good,

but you need to make sure that form says the right things, and that it gets into the right hands (giving it to the delivery driver is not going to suffice). Spend an hour with your lawyer talking through your forms and coming up with a plan to ensure proper disclosures are made. An hour’s worth of legal fees is small price to pay, given the alternative.

William E. Fischer is an attorney in the Fox Valley office Davis & Kuelthau, s.c. Mr. Fischer’s practice focuses on commercial litigation, including simple commercial collections to nationwide antitrust class action, and he uses his skills to help businesses be proactive in limiting their litigation risk. For questions about indemnification or other legal issues, contact Mr. Fischer 920.232.4843 or email atwfischer@dkattorneys.com.

NNB2B | April 2015 | 37www.newnorthb2b.com

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