Debts that can reach owners and managers
Several insolvency issues fall on individuals rather than on the company. Personal guarantees of loans and leases are the most common, and a company's bankruptcy generally does not stop the lender from pursuing the guarantor. Payroll taxes withheld from employees can become a personal liability for people responsible for paying them over, and sales taxes collected from customers can raise similar exposure under state law. In New York, certain large owners of privately held corporations and limited liability companies can be personally liable for unpaid wages. Some of these can apply even without fraud or intentional wrongdoing, which is why they catch people off guard.
Payments that may be reversed later
When money is short, owners naturally pay the creditors they know, including themselves, relatives, or a bank where they signed a guarantee. Those payments are among the first a trustee examines, and transfers to insiders can be challenged over a longer look-back than payments to outsiders. Repaying a loan you made to the company, taking back equipment, or paying bonuses while the company is failing can all be revisited. Mixing personal and company funds also invites arguments that the company was not really separate from you. Keep clean records of every payment, and talk to counsel before moving money between yourself and the company.
Sorting out personal exposure early
We start by listing every guarantee, every tax account, and every agreement you signed personally, and then look at the company's options with that exposure in view. How a wind-down is sequenced, a negotiated release in exchange for cooperation, or a personal filing alongside the company's can sometimes make a significant difference. Because the company and its owners can have different interests, you may need your own lawyer separate from company counsel. In a first meeting we identify which issues are personal to you and what decisions need to be made before the company's next step.
