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Superior Court Clarifies Owner Liability for Corporate Debts

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Because of the Superior Court’s recent ruling in Mark Hershey Farms, Inc. v. Scott T. Robinson, et al., executives who aren’t company shareholders or other owners (such as members of a limited liability company), can never be held personally liable for a corporation’s debt, even if the executive’s behavior was reprehensible.

 

The May 25, 2017 case states that an executive for an estate or trust that owns 100 percent of the stock, or a sole beneficiary of an estate or trust that owns all the stock, cannot be personally liable even though he or she benefits from the debt. Even if the executor or beneficiary acted improperly, personally benefited from having the corporation run up the debt, or distributed payments to himself or herself, the executor/beneficiary would not be held personally liable. An individual holding a beneficial, equitable, or independent interest cannot be held liable, even if that person exercises control over the corporation.

 

However, the court imposed a sham exception which would pierce the corporate veil and impose personal liability. Personality liability would exist should a company fail to do the following:

 

         Follow corporate formalities;

         Keep proper formal corporate books and records;

         Elect officers and directors;

         Segregate out corporate assets and bank accounts from personal assets.

 

It is critically important to follow these procedures, since failure would leave individuals vulnerable to company creditors and totally defeat one of the main reasons for having a corporation—protection from liability.

 

To protect yourself against personal liability to creditors of your corporation, contact Jones, Gregg attorneys in our business formation and structuring group. We can help you meet your corporate formalities, make sure your books and records are up to date, and put all legal protections in place to guard you against personal liability for corporate debt.

 

 

 

 

 

Superior Court Clarifies Owner Liability for Corporate Debts

Because of the Superior Court’s recent ruling in Mark Hershey Farms, Inc. v. Scott T. Robinson, et al., executives who aren’t company shareholders or other owners (such as members of a limited liability company), can never be held personally liable for a corporation’s debt, even if the executive’s behavior was reprehensible.

Act 171 Opens Doors to Minority, Women, and Veteran-Owned PA Businesses

With the federal government considering a huge infrastructure investment, Pennsylvania’s Act 171 business certification expansion will open a wide range of opportunities to our state’s minority, women, and veteran-owned businesses.

Whether new Fair Labor Standards Act overtime rules take effect in December 2016 or a recently passed House bill succeeds in delaying implementation until June 2017, start planning now to comply with the new regulations and protect your business.

Judge James Continues Stay on Landlord Registration Ordinance

On December 29, 2016, Judge James, “in the interest of judicial economy,” signed a court order stating that he won’t take action on Jones, Gregg’s pending case challenging that the City’s Landlord Registration Ordinance violates Pennsylvania’s Home Rule Charter...

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