entity liability

In business law, entity liability is when a corporation is treated as an independent legal entity, and should be held liable for the liabilities incurred by the business. 

The concept of entity liability allows a corporation to be held liable for the criminal misdeeds of its agents if:

• The agent is acting within the actual or apparent scope of their employment or authority, and
• If the agents intend, at least in part, to some way benefit the corporation through their actions.

The corporation can still be held liable for their agents’ criminal misdeeds or actions even if the agents’ actions are contrary to corporate policy or directly disregard express orders of the corporation. This rule was established in New York Central and Hudson River Railroad v. United States, 212 U.S. 481 (1909), where the court decided to extend the tort doctrine of respondeat superior to criminal cases, establishing a form of corporate criminal liability for actions of corporation’s agents.

[Last updated in November of 2022 by the Wex Definitions Team]