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Can creditors pursue a debt from a DBA business formed by a corporate officer?

Can creditors pursue a debt from a DBA business formed by a corporate officer?

Q: Am I personally liable for the debt of a corporation?

As a general rule, you are not personally liable for a corporation's debts. The corporation is a separate legal entity. However, if you signed a personal guarantee or if there is evidence of misconduct, you could be held personally responsible. It's crucial to understand your role and any agreements you may have signed.

Q: Who is responsible for debt if a corporation goes out of business?

If a corporation goes out of business, its debts are typically paid from its remaining assets. Shareholders are not personally liable for corporate debts unless they have provided personal guarantees or engaged in fraudulent conduct. If the corporation has insufficient assets, creditors may not recover their debts.

Full question:

If a corporation owes a debt which goes uncollected, and an officer of that corp forms another business under a DBA not affiliated with the debtor, but not incorporated, can creditors go after the debt with the DBA?

Category: Debts and Credit
Date: 04/07/2025
State: Utah

Answer:

If the corporation is solely responsible for the debt, then generally only the corporation is liable. However, if there are indications of fraud to evade the debt, this could change the situation. The specifics depend on various factors. It's advisable to consult a local attorney for guidance on this matter if you wish to take action.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

Can you be personally liable for company debts?

Generally, corporate officers and shareholders are not personally liable for corporate debts. The corporation itself is responsible for its obligations. However, if an officer engages in fraudulent activities or mixes personal and corporate finances, they may be held personally liable. It's important to maintain clear boundaries between personal and business finances to protect personal assets.

What happens if a corporation cannot pay its debt?

If a corporation cannot pay its debts, it may enter bankruptcy proceedings. This can lead to liquidation of assets or reorganization to pay creditors. Creditors typically cannot pursue personal assets of shareholders or officers unless there is evidence of fraud or personal guarantees. Consulting a legal professional is advisable for specific situations.

Am I personally liable for the debt of a corporation?

Are owners personally liable for corporate debts?

Owners of a corporation, typically shareholders, are generally not personally liable for corporate debts. The corporation itself is liable for its debts. However, if owners engage in fraudulent activities or fail to comply with corporate formalities, they may risk personal liability. Maintaining proper corporate governance is essential.

Who is responsible for debt if a corporation goes out of business?

Are corporate officers personally liable?

Corporate officers are generally not personally liable for the debts of the corporation. The corporation is a separate legal entity. However, officers can be held personally liable if they engage in illegal activities, breach fiduciary duties, or fail to adhere to corporate formalities. It's important for officers to understand their responsibilities to avoid personal liability.