Legal Question in Credit and Debt Law in California

If a business has failed and unsecured debts are associated to the business. can vendors collect from individuals if there is no guarantee on the debt and the business entity does not exist. ie. vendor sues company in small claims court for $500.00 after the business has failed and is no longer in operations. Can vendor collect against a company or individual that ceases operations?

what defense can one present in court?


Asked on 8/02/09, 9:27 am

1 Answer from Attorneys
Larry L. Doan Law Office of Larry L. Doan

What form of entity was the business? If it's just a sole proprietorship or dba, then even if there was no personal guarantee, the owner is still liable for the debts. Similarly with a partnership. If the business were incorporated, on the other hand, then shareholders are not normally personally liable for the corporate debts, unless the corporate form was just a sham and corporate formalities were not observed.

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Answered on 8/02/09, 4:16 pm


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