As a passive investor in an S Corp, do I face any personal liability if the company should be sued, go bankrupt, or otherwise?
Seattle, WA
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Posted 8 months ago in Corporate / Incorporation
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I am considering an investment in a Washington State S Corporation. As a passive investor, I want to know if my investment is limited to the money I have invested, or can it go further than that? ie. Can I be held responsible for in the case of bankruptcy, litigation or otherwise as a simple passive investor?
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Answers (1)Stuart Alan Heller
This attorney is licensed in Washington.
Posted 8 months ago.
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Unless you have a shareholder or other agreement that makes you liable, or you personally participate in some wrongdoing by the company, you should be shielded from personal liability. Also if the company does not behave like a corporation (e.g. doesn't have bylaws, doesn't hold annual shareholders' meetings, doesn't create and retain minutes of its shareholders' meetings, etc.) it is possible though difficult for someone suing the corporation to successfully claim that the corporation is a sham , "pierce the corporate veil" and go after the sharehlders.
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