What happens if a S-corporation is dissolved and owes a debt it cannot pay?

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What happens if a S-corporation is dissolved and owes a debt it cannot pay?

I have sold my business. My corporation is being dissolved. I hope to have enough revenue to pay all my debts. I have depleted my personal and business assets trying to keep the business operating the last few years. I did not want to file bankruptcy. The amount I am concerned about is approximately 6K in past due rent.

Asked on March 24, 2012 under Bankruptcy Law, Georgia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

As a general matter, the shareholder(s) of a corporation are not personally liable for the corporation's debts; therefore, you should not be responsible for the past due rent and the landlord should not be able to sue you (or if the landlord does, you should be able to get the case dismissed quickly). There are exceptions, of course, but assuming you have not personally committed fraud against the landlord, and that the S-corp was an actual business, not a pretext to defraud creditors, the main exception would be if you had personally guaranteed the rent. If you had, that personal guaranty is enforceable against you, and you'd be liable for the rent; but if there is no personal guaranty, the landlord should not be able to hold you responsible for the business's debt.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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