Can I take out a loan under my corporation for my business and not have my personal credit be affected if I can’t pay back the loan?

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Can I take out a loan under my corporation for my business and not have my personal credit be affected if I can’t pay back the loan?

Basically, will it show up on my personal record in the future? I am looking to apply for a small business loan for an online boutique, however I am concerned that if my business fails that my credit will be severely affected. From what I understand, the loan will only be the responsibility of the corporation as long as I don’t sign a personal guarantee or offer my property as collateral. I am not well versed on this subject and would like to know as much as I can before I make any decisions.

Asked on January 25, 2016 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

You understand correctly: if the corporation takes out the loan and you do not personally guaranty it, it will not affect your credit--and you will not be liable for it--with one exception; if they can "pierce the corporate veil," you could be personally liable. This means that if they can show that the loan was NOT in fact used for corporate purposes but was instead used for your own personal benefit, creditors can "pierce" or get through the corporate shell and hold you personally liable for the money.


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