Home > Uncategorized > Dreaded Words for Business Owners: “Personally Liable”.

Dreaded Words for Business Owners: “Personally Liable”.

I just read an interesting article on the ABAJournal about the co-founder of “Buckyballs”

 

Evidently this product has caused serious harm to children and not only has the product been recalled, but personal liability has been assessed to a co-founder.

 

That is a big deal!

 

The ABA Journal reports the story here:

 

The Company that produced Buckyballs, Maxfield & Oberton Holdings, LLC, filed for a dissolution at the end of 2012.

 

That a shareholder in a company would be held personally liable for the debts/liabilities of a dissolved  company is is an usual outcome for sure.

 

Even in dissolution, under Michigan law, the members are not anymore personally liable for the obligations of the Company than they would otherwise have been. See MCL 450.4805, applied to limited liability companies:

(2) The members or managers that are winding up a limited liability company’s affairs shall continue to function, for the purpose of winding up, in accordance with the procedures established by this act, the articles of organization, and operating agreements, shall not be held to a greater standard of conduct than that described in section 404,1 and are not subject to any greater liabilities than would apply in the absence of dissolution.

In summary of some of the previous items I have hit on in prior blog posts regarding personal liability of corporate debts, business owners should make sure to:
1. Comply with all corporate formalities, operating agreement/bylaws, make sure company is and remains in good standing with the State of Michigan; 
2. Don’t commingle business/personal assets; and
3. Personal Guarantees = Personally Liable
4. If you dissolve your company – you are entitled to take actions to “wind up” the company.  However, if you continue to do business under the company name you are opening yourself up to be held personally liable.  You may be operating under the name of the company, but you are most likely acting as a sole proprietor now.
Questions? Comments?
Email: Jeshua@dwlawpc.com

 

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