Which statement best describes shareholder liability in professional service corporations?

• A. Shareholders have unlimited liability for all corporate debts.
• B. Shareholders have limited liability for acts of others; they are liable for negligent or wrongful acts they personally supervise, not for acts of those they did not supervise, and not for contractual debts beyond contributions.
• C. Shareholders have no liability for any acts of the corporation.
• D. Shareholders are personally liable for all acts by the corporation.

Answer: (B)

Shareholders in professional service corporations generally enjoy limited liability for the corporation’s debts and for acts carried out by the corporation. The key exception is personal accountability for their own negligent or wrongful acts, or for acts they personally supervise. They aren’t personally liable for the bad acts of others merely because those others are associated with the firm, and they aren’t on the hook for contractual debts beyond the amount they contributed unless they personally guarantee them. So the statement that best describes shareholder liability is that they have limited liability for acts of others; they are liable for negligent or wrongful acts they personally supervise, not for acts of those they did not supervise, and not for contractual debts beyond contributions.