Full question:
If I form a LLC for my small business today would LLC protection apply to any prior credit obliligations or private investments that are a partof this company.
- Category: Corporations
- Subcategory: Other
- Date:
- State: Texas
Answer:
If you are converting a sole proprietorship or a partnership to an LLC, and the prior business has outstanding claims or debts, you and your co-owners will remain personally liable for these debts. However, your new LLC may assume and pay these bills as they come due. As a courtesy, all creditors of the prior business should be provided with a letter notifying them that you're converting your prior business to an LLC, and ask them to put future bills in the name of your LLC. If your prior business has significant disputed debts or claims that your LLC will not automatically pay when it begins operating, you should consult an attorney about your legal responsibilities and rights as to these disputed amounts, and whether you'll have to take any extra steps when converting your business to an LLC. Forming a LLC will not protect against claims against the owner who has fraudulently used the LLC for an unjust purpose to the detriment of the creditor.
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.
