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Elizabeth Prentice
Elizabeth Prentice, Attorney
Category: Business Law
Satisfied Customers: 174
Experience:  Legal counsel for multitude of businesses; Business Law Professor; Experience as In-House Counsel
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Business law question. We are set up as an S corp, but do

Customer Question

Business law question.

We are set up as an S corp, but do not have an operating agreement in place One of the partners brought in a consultant that they had previously worked with. The consultant submitted an inflated bill that the other partners disputed. The initial partner then wrote the consultant a check from their personal account and now wants the company to reimburse. We do not believe that this is reimbursable or should be reimbursed since the invoice was paid directly by the partner, not with company funds and the invoice was not approved by the company.

Is the company liable?

Is the company liable for this debt?
Submitted: 3 years ago.
Category: Business Law
Expert:  Elizabeth Prentice replied 3 years ago.
In PA, a corporation can become liable for the personal debts of an owner/partner only if value was conferred upon the business. Typically, if an owner agrees to a debt and pays it personally, then the company would not be liable. The next step is assessing whether the company benefited at all from what the partner/owner paid for and how much in value it was benefited. Even if the company was benefited from the item or service, a valuation should be done to determine what is fair market value in your area for such a service. If the price was inflated grossly beyond what other company's in PA were paying for the service, it is unlikely the company would be required to pay back the owner more than the FMV.

I hope my answer has assisted you and that you will leave me a positive rating!
Expert:  Elizabeth Prentice replied 3 years ago.
John,

How are you doing? Have you remembered to rate my answer? If you haven't, please do so now. Please let me know if there is anything else I can assist you with.

JustAnswer Expert,
Elizabeth
Expert:  Elizabeth Prentice replied 3 years ago.
John:

Hi, How are you doing? Have you remembered to rate my answer? If not, please make sure you do, so that I may receive proper credit. If there is anything else I can help you with, please let me know.

JustAnswer Expert,
Elizabeth