Legal Question in Business Law in Illinois

Re: disolving an s-corp

Generally, if you did not personally guarantee the corporation's obligation to the creditor, you should not be personally liable for the debt. However, there are many exceptions to the general rule. Some exceptions are:

1. If you took money or other assets out of the corporation for less than adequate consideration, you may be liable up to the amount you took out.

2. The creditor may be able to "pierce the corporate veil" under some circumstances. (For a review of some of the factors, see my outline at http://www.illinoisbusinessattorney.com/articles/piercing_veil.html) Some of the factors Illinois courts look at are: (1) Inadequate capitalization, (2) Failure to issue stock, (3) Failure to observe corporate formalities, (4) Nonpayment of dividends, (5) Non-functioning of other officers or directors, (6) Absence of corporate records, (7) Commingling of funds, (8) Diversion of assets, (9) Failure to maintain arm's length relationships among related entities, and (10) Whether the corporation is a mere facade for the operation of the dominant shareholders.

3. Depending upon the facts, if you incurred the debt at a time when the corporation was clearly unable to repay it, the creditor may be able to personally hold you liable for fraud.

Obviously, the vendor can choose to go after you individually under one of these (or other) theories but it is going to be up to the vendor to prove that you are personally liable.

Re: disolving an s-corp

A creditor can still pursue a cause of action to collect the debt from the corporation even after the company is dissolved. Also, you need to file your articles of dissolution with the secretary of state. Go to the secretary of state website for more info. Failing to properly wind up the corporation's business can have legal and tax ramifications, so if you don't feel comfortable doing it yourself, find an attorney to help you do it properly.