What to do about potential personal exposure regarding a lawsuit against a corporation that I own?
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What to do about potential personal exposure regarding a lawsuit against a corporation that I own?
We have a corporation that has not been operating for over 1 1/2 years. The company is essentially defunct and there is no money or revenues as it is no longer currently operaing. We cannot afford at this time to have an accountant get the corporate taxes current so we can’t dissolve or bankrupt the company officially. Our standing with the state is terminated according to the state website. A creditor is trying to sue the company and me personally as an owner for $250k. It was unsecured credit a fuel provider with no personal guarantees. Do I have any exposure personally?
Asked on April 13, 2012 under Business Law, Virginia
Answers:
Madan Ahluwalia / Ahluwalia Law P. C.
Answered 12 years ago | Contributor
No, you don't except if you conducted the corporation without proper records or did not main separation between personal transactions and conduct from corporate ownership or commingled company's funds, etc.
Concept of "piercing the corporate veil" has to be exercised to hold you liable in the lawsuit by the creditor. It is difficult route to go and cumbersome to prove. The phrase piercing the corporate veil is used to describe the action of a court to hold corporate shareholders personally liable for the debts and liabilities of a corporation.
As long as you conducted corporate business separately and maintained proper records, you should not have a problem.
If creditor sues, you can file a motion to dismiss lawsuit against you for the reason that debt was against the company.
It might be worthwhile to find a way to formally dissolve the company to effectively make the $250K debt and related problmes go away. Find a way and buy your peace of mind, my friend.
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