What business structure limits a broker's liability for employee actions to some extent?

A Limited Liability Company (LLC) is a business structure that significantly limits the personal liability of its owners, known as members, for the debts and actions of the company. In the context of a real estate brokerage, if an employee commits a wrongful act in the course of their employment, the liability typically extends to the company rather than the individual members. This means that members of the LLC are generally not personally responsible for the obligations or liabilities of the company, thus protecting their personal assets.

In a sole proprietorship, the owner is personally liable for all business-related debts and actions, which does not offer any liability protection. In a general partnership, partners share liability for the business's actions, meaning personal assets could be at risk if an employee engages in misconduct. Franchises do not inherently provide liability protection regarding employee actions; the franchisee remains liable for their business operations. In contrast, forming an LLC provides a distinct separation between personal and business liabilities, making it an advantageous structure for brokers looking to mitigate risks associated with employee actions.