Liability of S Corporation Officers

[M.Aguilar]

What is the name of your state (only U.S. law)? California

We have a supplier who is threatening legal action for unpaid invoices.

According to the letter from this suppliers lawyer they will file a collection action and "attach your property wherever located".

We assume the "your" refers to the property of the corporation itself and not the property of the individual corporate officers. Are the individual officers of the S Corporation protected from this kind of action?


Thank You.

 

[Zigner]

What does your corporate counsel have to say?

Being a corporation MAY protector the shareholders, if the corp. is properly managed...

 

[phoenyx]

Check if you have a copy of whatever application you made with the supplier to purchase from them. I doubt a supplier extended credit to the S Corp without some type of paperwork being filled out. Many creditors require owners of an S Corp's to sign a personal guarantee to have the S Corp extended any credit, although some don't. It might have been in the application without you realizing it was there - knowing whether it was in there is irrelevant. If there is personal guarantee language in the supplier's application that you filled out and signed, you know your answer right then - there's no corporate protection.

If you don't have a copy of the application you filed, I would personally ask for a copy of it, although I can't say whether asking for a copy of it would provoke them into taking further action, although they sound like they're taking whatever actions they feel they can take.

If there isn't personal guarantee language in the application you filed, Zigner is right, an attorney would be best suited to answer your question. It varies state-by-state. Annual reports (if there are any in your state) have to have been filed on time, you have to have properly kept up the corporation - i.e. annual meetings, etc, etc.