If an S-corporation is closed, who is liable for its debts?
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If an S-corporation is closed, who is liable for its debts?
It was taken over by a creditor because we could no longer pay them. The S-corp was closed. There is a small remaining debt that the corporation incurred. Do I personally have to pay for it? I did not sign a personal guarantee for it and the debt was in the name of the corporation.
Asked on July 3, 2012 under Business Law, Oregon
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 11 years ago | Contributor
If you did not sign a personal guaranty, then you would not be responsible for most debts of the corporation. The exceptions are:
1) Certain kinds of tax debts, if you were the responsible person at the corporation for the taxes.
2) Debts due to any tortious acts you personally did, for which you could be sued personally--e.g. if you ran someone over, driving the company van.
3) If the creditor can do the incredibly hard and rare thing of "piercing the corporate veil" and show that the corporate form was a fraud--e.g. you commingled personal and corporate funds; there was no actual viable business; the whole point of the corporate entity was to defraud personal creditors--and thus that you should be denied the protection of the corporate form.
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