Thursday, July 21, 2011

No limited liability when signing a pre-formation contract

The title says it all, if you are the owner of an LLC/Corp, do NOT sign a contract before the entity is legally formed. If you do, you are signing the contract in your principal capacity and have unlimited  personal liability related to the contract. 
In other words, pre-formation contracts limit your limited liability.
Assuming you have signed a pre-formation contract, try to have the creditor(s) sign a novation replacing the entity in your place.

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