Repayment of loan established prior to company no longer existing.

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Repayment of loan established prior to company no longer existing.

An outstanding bank loan needs to be paid off from a prior S-Corporation closing. Previously owned by 2 people 50/50. 1 partner refuses honoring loan..and previously depleted checking account balance. Bank stated if 2nd partner wants loan taken care of, they would need to pay entire balance ($8,800) off (i.e. can not divide in half). Is there anything the 2nd partner can/should do to not be held accountable for entire balance? Otherwise loan will go to litigation against both partners; causing more fees.

Asked on June 22, 2009 under Business Law, Maine

Answers:

B. B., Member, New Jersey Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

A corporation isn't a partnership, even if it's taxed as one under Subchapter S;  if you are one of the two owners of the former corporation, you were a shareholder, not a partner.  Between the other shareholder taking money he wasn't entitled to (as it sounds from your question), and a number of other important things, such as whether the two of you signed individual guarantees on this loan, the only way for you to get reliable advice about how to deal with this is to bring all the paperwork and all the facts to a lawyer in your area.  One place to find qualified attorneys is our website, http://attorneypages.com


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