Can creditors sue a business owner personally

Long Beach, CA Viewed 583 times. Posted 10 months ago in Business

Closing a business: I am an officer in a very small C Corp. Due to lack of business, we closed the business and just 'walked away' without declaring Bankruptcy. The business left behind $40,000 in unpaid bills. Between $1500 and $20,000 per supplier. The business left no forwarding address. Some of the suppliers that are owed have found my home address and are beginning to send me demands for payment. I never signed any personal guarantees for any of these suppliers. Can they sue me persoanlly to recover their debts from me? the smaller ones in small claims court and the lager in civil court? all the debts incured were invoiced to the Corporation. I thouight since it's a corporation i am not liable for any of the debts. I can't afford to hire an attorney, should i just ignore these demands. thank you - Is this your question? Add additional information

Answers (3)

Brian T Pedigo

This attorney is licensed in California. Posted 10 months ago.

Depending on the facts of your case, your creditors may be able to "pierce the corporate veil" and go after you personally. Given the amount of money at issue, you ought to seek legal advice to prepare yourself for what you may expect to come ahead.

Marc D McCain

This attorney is licensed in Arizona. Posted 10 months ago.

As with any matter, I'd need to examine the lawsuits and the facts related to each to reach any conclusions on your issues. However, as a general rule, corporations and limited liability companies offer their owners protection against personal liability for the debts of the company. The first answer to your question raised the issue of piercing the corporate veil to get at your personal assets. While this is a recognized legal theory that enables a claimant to reach the personal assets of one or more owners of a company, it is very fact specific and is a difficult legal theory to employ -- it requires certain facts to be present such as the company was formed for fraudulent purposes.

Regarding whether you should ignore the demands, the anwswer is no. Although you may have a situation where there is no personal liability for the debts, a debtor can always sue a company's owner(s) personally in hopes that the owners won't respond and they can get a default judgment and then go after your personal assets, or that the lawsuit will create some incentive to pay them some or all of the debt owed. Assuming there is no basis for a claim against you personally, you should hire an attorney to appear on your behalf and demand that the other side drop the claims against you personally (assuming the facts warrant this action). If the other side refuses to do so, a motion to dismiss can be filed seeking to have the claims against you tossed. Note that attornyes need a good faith basis to bring an claim against a party so if there is absolutely no basis for personal liability, the lawyers on the other side could be walking a fine line by bringing the claim in the first place.

McCain & Bursh, PLC, handles these types of claims. www.mccain-bursh.com.

Pauline Holland Galbraith Getz

This attorney is licensed in California. Posted 10 months ago.

In the caption, you say "business owner" and in the body of your question, you identify yourself as "an officer". Be very careful to identify you actual role. As an officer only, you will have a much lower chance of being held personally liable, but as an owner you may have a higher risk. Generally, officers who are not owners or directors are going to successfully avoid personal liability (except for payroll taxes and the like). Owners may have more work to do in avoiding the liability. For example, an owner may have to adequately demonstrate that she or he did not intentionally disable the corporation from paying its debts, or demonstrate that they did not pull assets out for themselves, leaving nothing for the creditors. Good luck.