Q: Does an S-Corp protect the owner from losing their personal belongings or their cemi trucks they use for the business.
A:
Creating a corporation (either under subchapter S or C) or a limited liability company to operate your business is a wise decision for multiple reasons, one of which is the protection of your personal assets. Typically, that means that your personal belongings and similar items could not be sought by creditors of the company alone. However, a business owner can contractually give up that protection by signing a personal guarantee of business debt. When a business owner first starts out it is commonplace for vendors to require the owner to sign a personal guarantee before the vendor will do business with the company. So, if you signed a personal guarantee, and the business fails to make the necessary payments, then the creditor can go after your personal assets. Additionally, if the business owner signs a contract in his own name rather than on behalf of the business, then the business owner can be personally liable for the debt since it is a personal debt instead of a business debt. Lastly, even if the debt is a business debt with no personal guarantee, the business owner can be held personally liable for the debt if the creditor is able to pierce the corporate or limited liability shield. Piercing is a fairly complicated issue but basically can occur if the business owner fails to treat the business assets separate from his/her own assets.
Incidentally, you reference having semi-trucks. Normally, such equipment would be owned in the name of the business as business assets, rather than owned by the business owner personally. As business assets, you would be able to depreciate the trucks for tax purposes, but they could be pursued by creditors. You should also know that if the basis for liability is the negligence of the business owner, then the owner's personal assets would be subject to collection efforts. For example, if the business owner T-bones another car at an intersection, the business owner is personally liable for his/her own negligent operation of the vehicle.
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.
