Do I have personal liability for a sub S corporate debt?

Asked over 4 years ago - Fort Myers, FL

My consulting company, which has no assets and no longer any income, owes $3,000 to an individual. He has recently sued me in small claims court - one suit names me as an individual and another names me AND my corporation. I've had my Florida sub s corp since 2001 with never a problem until the economy has pretty much put me out of business. Can I be made to be responsible for a debt that was transacted in my corporation with me signing as the president of the corp?

Do I need a lawyer to go to small claims court for me?

Attorney answers (3)

  1. Blaise E. Picchi

    Contributor Level 15

    Answered . No, you don't necessarily need a lawyer but you do need to move to dismiss the action against you personally because you are not a party to the action. But whether you are or not depends on what kind of action it is. Is it a breach of contract by your corporation and if so, how was the contract executed? Who were the parties? Was your corporation a party to the contract? Did you actually use the word "incorporated" after the name of your corporation in the contract? Did you clearly sign the contract as "president" not just in your own name? Is the lawsuit for an accident or negligence that you personally commited while working for the corporation?

    Can't really answer your question without knowing these facts. When it comes time to go to court in small claims you must clear tell the judge you want the action against you personally dismissed.

    The foregoing is for informational purposes only and not legal advice. Nor has any attorney-client relationship been formed hereby.

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  2. Elazar Aryeh

    Contributor Level 12

    Answered . So long as you acted as an agent of the Corporation you can not be sued personally for the debts of the corporation. Only if you acted fraudelently or in contravention of your duties for the corporation can you be sued personally. From the limited information you have written, it's my opinion that you shouldn't be sued personally. Good Luck.

  3. Andreas F. Zybell

    Contributor Level 9

    Answered . If the litigation is based on breach of contract and you signed the contract as president then the fast answer is no you are not personally on the hook. However, life is never that simple. Lawsuits are often brought against shareholders of a corporation on the theory that facts warrant a piercing of the corporate veil. When can the corporate veil be pierced? One of the principle ways of piercing the corporate veil is by demonstrating that the formalities required to maintain a corporation as such were not followed. For example, were annual meetings held on a regular basis and were minutes drafted to reflect the business conducted during those meetings? Were all requisite filings with the state made in order to keep the corporation in good standing? Of course, the corporation can never be used to shield an officer or shareholder who is the actual wrongdoer? For example, a doctor who commits malpractice cannot hide behind his professional corporation and argue that he is not personally liable for his bad actions. The injured party will have a claim against both the corporation and the doctor. You should also be aware of the fact that the party suing may include a cause of action alleging that the reason the corporation is incapable of paying the debt is because, in your capacity as an officer or shareholder, you diverted unreasonable amounts of cash to yourself after you became aware that the corporation was failing (commonly referred to as a fraudulent conveyance). A more definitive response to your inquiry can only be made after the complaint is reviewed by a lawyer. Good luck.

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