personal liability

Post image for Signing a Personal Guarantee Can Be Surprisingly Costly

When you own a small business, signing personal guarantees often seems like a necessary evil. Unless your company has strong credit, landlords, lenders, and others will often require you to personally guarantee your company’s obligations to them. One of the most harrowing experiences I had when I set up my own law firm was signing a merchant services agreement so I could accept payment by credit card — which of course required a personal guarantee.

Although business owners can protect their personal assets from their business’s liabilities by doing business through a corporation or a limited liability company, your┬ácompany can’t shield you from liability arising out of your own actions. Also, you’ll be on the hook for company debts that you personally guarantee.

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River Oaks Home Association v. Lounce

The Missouri Court of Appeals, Western District reversed the trial court’s ruling that Zeria Lounce was individually liable for home association assessments where she had transferred her home’s title to her revocable living trust. Although Lounce didn’t inform the association of the transfer of her property to the trust, the home association and declaration of restrictions and covenants documents did not require her to notify the home association of the transfer.

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