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 12 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.
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