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Thomas McJD
Thomas McJD, Attorney
Category: Business Law
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Experience:  Experienced in Corps, LLCs, Partnership, etc.
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I owned a construction company up till last july. We ended

Customer Question

I owned a construction company up till last july. We ended up closing the business due to poor sales and we litterally ran out of money. I was forced to file personal bankruptcy due to some personal guarantees for accounts we could not pay.
A former customer is suing "me" and the company for work she said was done improperly and for some materials that were not provided to her to finish her job. We di 90% of the job and were forced to close the business at the same time. She never made all the payments for the job and is now suing me because she had to hire someone else to finish. She is suing me for almost twice the cost of the original job.
The company was a sub-chapert "s" corporation. Is she able to sue me personally?
Submitted: 3 years ago.
Category: Business Law
Expert:  Thomas McJD replied 3 years ago.

She can't just sue you personally because she contracted with the corporation and not you. You personally did not owe her anything and you personally are not the proper party in the lawsuit. This is the liability protection that a corporation, as a form of business, offers to the shareholders, directors and officers of the corporation: they cannot be sued in their personal capacity for liabilities of the corporation under normal circumstances.

 

The only time that is not the rule is when the person suing pierces the corporate veil of liability protection of the corporation. This can only be done where that person proves that the corporation was not really a separate entity from you personally and is merely your alter ego. This can only be proved when you didn't comply with corporate formalities, like maintaining separate books and accounts for cash, etc. If you were taking money straight from the corporation (not salary or dividend distribution) and otherwise commingling funds, then this person would have a good argument to avoid the corporate veil and get to you personally. However, it is generally a quite difficult argument to make and if you kept separate corporate books and maintained separate cash accounts from your personal accounts (and otherwise generally complied with corporate laws and maintained your corporate existence with the secretary of state) you shouldn't have anything to worry about.

 

 

 

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Thomas McJD, Attorney
Category: Business Law
Satisfied Customers: 6515
Experience: Experienced in Corps, LLCs, Partnership, etc.
Thomas McJD and other Business Law Specialists are ready to help you
Customer: replied 3 years ago.

I did maintain sep. books and I did draw a paycheck as any other employee.

She is suing me in small claims court, do I actually need to go to the hearing? Is your answer generally the way the law works in most states. I am in New Jersey.

Expert:  Thomas McJD replied 3 years ago.

Yes, this is how the law works in all states. I would definitely go to the hearing and make an oral motion for dismissal based on the fact that you are not the proper defendant party defendant. If you have enough time, I would recommend that you also hire an attorney to file a special appearance and motion to dismiss on that same basis.

 

 

Customer: replied 3 years ago.
Ok, Thanks
Expert:  Thomas McJD replied 3 years ago.
You're welcome. Have a good night.

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Thomas McJD
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Experienced in Corps, LLCs, Partnership, etc.