Can I sue the owner of a company personally if their companyowes me money?

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Can I sue the owner of a company personally if their companyowes me money?

I did work for them under my company name. They paid with their business checking account to my business checking account. I sued the owner personally, and his lawyer says I cannot do that. My company was never incorporated, theirs is.

Asked on October 25, 2010 under Bankruptcy Law, Ohio

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

If the company that you believe owes you money was incorporated, then it is almost certainly the case that you cannot sue the owner personally. That because the owners of a corporation (or a limited liability company or LLC) are not liable for the debts and obligations of the corporation (or LLC). That's the main reason that small business--even self-employed contractors and freelancers--should set up as an LLC or corporation. There are some "limited" possibilities for recover:

1) Obviously, if the owner personally guaranteed the debt, he could be sued.

2) If the owner personally did something wrongful, it may be possible to sue him for his wrongful act as well the company for its breach. For example, say you only took the job because he lied to you about something significant, such as the fact that his company had the money to pay you. IF you can show the he personally knowingly lied about something significant, at the time he convinced you to take the contract or job, with the intention that you rely on that lie, and it was reasonable for you to rely on it, you may have a fraud case. You'd be looking to hold him personally liable for his wrongful act, not liable in his capacity as company owner. If you think this might be the case, it  would be worthwhile consulting with an attorney--it's no easy to sue the owner of company personally no matter the behavior, and you'd want an attorney's help.

3) In VERY rare cases, if you can show that the company is a pretext--it doesn't really have a separate existence or do much of anything; the owner uses it as his personal piggy bank; uses the corporation specifically to avoid having to pay his lawful debts--then you may be able to "pierce the corporate veil" and sue him directly. But be cautioned: courts do not like to do this, and it is both rare and difficult.

3)


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