What can go wrong that requires company officers to be personally liable for costs?

Asked almost 2 years ago - New York, NY

I recently heard about a friend who wasn't paying payroll taxes. In his case, he thought he was smart enough to do the accounting/payroll himself. He didn't pay payroll taxes for those who were on a work visa or something and ended up using the money to lease Ferrari's and ended up having to pay for all the back taxes and the amount was so large that he had to declare bankruptcy.

I am aware that if a company doesn't pay payroll taxes, then the company officers can be held liable. But I have more specific questions:

1) Are you liable if you are an owner of the company but not the managing officer like the CEO, or CFO?

2) What if you don't own the company but you are the CEO or CFO or a non-financial officer.

3) What other illegal things result in seizure of personal assets?

Attorney answers (3)

  1. Michael T Millar


    Contributor Level 19


    Lawyers agree

    Answered . I agree with Mr. Gold - your question is too broad.

    There are too many ways in which a corporate office can have personal liability to list here.

    Here in NJ, corporate officers who authorize the use of contracts or practices that violate the consumer fraud act can be held personally liable.

    As a general rule, if you deal directly with consumers, you can be personally liable for any misrepresentation.

    More obviously, if you sign personal guarantees, you can be personally responsible for company debts.

    If this answer was helpful, please mark it as helpful or as a best answer. This answer is for general education... more
  2. Jeffrey Bruce Gold

    Contributor Level 19


    Lawyers agree

    Answered . failure to pay sales tax. certain types of fraud. I'm sure there others. If you post specifics such as Can _____________ result in a loss of your personal assets, you'd get a better response.

    If you'd like to discuss, please feel free to call. Jeff Gold Gold, Benes, LLP 1854 Bellmore Ave Bellmore,... more
  3. Evan A Nielsen

    Contributor Level 18


    Lawyers agree

    Answered . If you are a responsible officer, director, shareholder or other individual who has influence and control over whether or not the tax is paid, you can often be held personally liable. This definitely applies in the case of payroll taxes and usually also applies to sales tax or any other tax the company is to collect and remit to the state or federal government.

    So the fact that you're not an owner, bur are an officer may give rise to liability. And you can even be "just an employee" that handles the payroll and if you're the one causing the taxes not to be paid you can be personally liable.

    Particularly with payroll taxes, the IRS casts a wide net and essentially presumes personal liability for anyone who was involved in any way with the payroll tax process.

    Hope that helps.

    Evan A. Nielsen is licensed to practice law in California and handles federal tax matters throughout the U.S. The... more

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