When an LLC Won’t Protect You: Personal Liability Under the Virginia Consumer Protection Act

A Virginia court recently reinforced a point that many business owners misunderstand: forming an LLC does not protect you from your own misconduct. In Luna v. Autobahn Motors LLC, the court held that the sole member of an LLC could be personally liable under the Virginia Consumer Protection Act (VCPA) for his own misrepresentations, even though the business itself made the sale. The ruling draws a clear line between liability based on ownership and liability based on conduct. When the owner is the one making the statements or withholding key information, the LLC does not shield that behavior.

Justin Luna purchased a used car from Autobahn Motors LLC, a single-member LLC. Before the sale, the company knew the car had structural rust because the auction house disclosed it. The owner, Shams Behgoman, personally handled the transaction and interacted directly with Luna. Despite knowing about the defect, he vouched for the quality of the vehicle and did not disclose the rust.

After the purchase, the car immediately began having problems. A mechanic later confirmed the structural rust and other issues. Luna filed suit against both the LLC and Behgoman individually under the Virginia Consumer Protection Act.

Behgoman argued that he could not be held personally liable because the LLC, not him individually, sold the car. He also pointed out that Luna had not attempted to pierce the corporate veil, which is often required to reach an owner personally. This argument reflects a common assumption among business owners that the LLC structure provides complete insulation from liability.

The court rejected that position. It emphasized that the case was not about ownership of the LLC. It was about the owner’s own conduct during the transaction.

The court held that Behgoman could be personally liable because he made the misrepresentations and omissions that led to the claim. Virginia law protects LLC members from liability that arises solely from their status as members. It does not protect them from liability arising from their own wrongful acts.

The distinction is straightforward:

• Liability based on ownership is generally protected
• Liability based on personal conduct is not
• No veil piercing is required when the claim is based on the individual’s own actions

The court found that Behgoman’s failure to disclose the defect, combined with his affirmative statements about the car’s quality, created personal exposure under the VCPA.

To succeed on the VCPA claim, Luna also needed to show that Behgoman qualified as a “supplier” under the statute. The court concluded that he did. As a licensed dealer who personally engaged in the transaction and made representations to the buyer, Behgoman fit within the statutory definition.

The court rejected the argument that only the LLC could be considered the “supplier.” It held that both the company and the individual could fall within the statute based on their respective roles in the transaction. This interpretation reflects the remedial nature of the VCPA and its focus on protecting consumers from misleading conduct.

The jury returned a verdict in Luna’s favor under the VCPA. Although the fraud claim did not succeed, the statutory claim was sufficient to support liability. The court allowed the claim to proceed against both the LLC and Behgoman individually.

The financial consequences were significant:

• Attorney’s fees: $78,594.75
• Costs: $14,211.52

This result underscores how quickly exposure can escalate when consumer protection statutes apply.

Many business owners view the LLC as a complete liability shield. That belief is only partially correct. The LLC protects against certain types of risk, but it does not eliminate personal accountability for individual conduct.

An LLC generally protects you from:

• Contractual obligations of the business
• Debts incurred by the company
• Actions taken by other members or employees

It does not protect you from:

• Your own misrepresentations
• Your own omissions
• Your own tortious conduct

When you are directly involved in a transaction, your actions can create personal liability regardless of the entity structure.

This case highlights several practical steps that business owners should take to reduce risk. The structure of the business matters, but so does how the business operates on a day-to-day basis.

Business owners should:

• Ensure that all representations to customers are accurate and complete
• Disclose known defects or risks, especially in consumer transactions
• Train employees and sales personnel on compliant communication practices
• Understand how consumer protection laws apply to their business
• Work with counsel to align business practices with legal risk management

These steps do not eliminate risk, but they materially reduce the likelihood of personal exposure.

If you interact directly with customers, your conduct matters as much as your legal structure. Many business owners invest time and resources in forming an LLC but do not implement the operational safeguards needed to support that structure. This gap is where liability often arises.

The key point is simple. Liability follows conduct. The LLC does not override that principle.

At Dunlap Law, we work with business owners to align legal structure with real-world operations. That includes entity formation, governance, risk management, and compliance with Virginia consumer protection laws. The goal is not just to form an LLC, but to ensure that it functions as part of a broader, defensible business strategy.

If you want to evaluate your current structure or reduce your exposure, we can help you do that in a practical, business-focused way.

 

Image by Denis Belkin from Pixabay