Delaware Business Litigation Legal Questions

Your question is a little confusing.  How can there be three partners and two shareholders of a corporation?  Why did 3 officers sign a loan agreement if it was on behalf of the corporation and not in their personal capacities? For purposes of this answer, I will assume that (a) you are asking about the personal liability of corporate shareholders for the corporation's obligations; and (b) the agreement was signed by the officers on behalf of the corporation, i.e. they signed "XY, CEO of ABC Corporation", and not simply "XY".  I will also assume that no individual personally guaranteed the corporation's obligations.  If anyone signed in their personal capacity and/or acted as a guarantor for the corporation, that person would be personally liable. Shareholders are normally not responsible for the obligations of the corporation.  This is one of the main reasons that people incorporate.  If anything, llc members are more likely to be personally liable than are corporate shareholders, although the rules are generally the same.  Moreover, the loan agreement was between the programming co and ABC Corporation; creating an ABC LLC does not change that.  You can't unilaterally change the obligor on the agreement after the fact.  ABC Corporation would remain liable on the agreement and changing to an llc would not affect any personal liability that its shareholders might have. There are exceptions to the rule that shareholders are not personally liable for the corporation's debts.  In addition to certain statutory exceptions which don't seem to apply here (for example, there is a NY statute that makes the top 10 shareholders of a corporation personally responsible for some unpaid wages of corporate employees), claimants can "pierce the corporate veil" to hold shareholders personally liable where, generally, (a) the shareholders completely dominate the corporation and fail to operate it as a corporation (e.g. by failing to have shareholder or board of director's meetings, etc.) and (b) utilize the corporate form to commit a fraud or other wrongdoing (such as where the shareholders use the corporation's assets as if they were there own, by, for example, commingling funds, paying personal bills out of the corporation's bank accounts, etc. I don't see why you would dissolve the corporation, and I think dissolution would make things more difficult for the shareholders, not necessarily create any personal liability but create a hassle by the creditor asking what happened to the corporation's assets when it dissolved.  Also the agreement may have a provision which creates consequences if there is a dissolution.... Read More