Legal Question in Business Law in New York

Re: liability for corp debts

A joint venture agreement will provide limited insulation from liabilities to third parties, depending upon (a) the nature of the liabilities, (b) the nature of the joint venture which the two corporations are collectively undertaking, and (c) the extent to which the corporations respect the formalities through which they continue to maintain their positions as separate and distinct entities. As an intitial matter, a "joint venture" agreement will only govern the rights between the two parties who enter it. Under New York State Law, if two corporations conduct some type of business jointly, with third parties, those third parties may lawfully recognize the relationship between the corporations as a general partnership, in which each of the partner corporations are jointly and severally liable for all liabilties arising under the joint venture. As for pre-existing liabilities which the "other" corporation already has, so long as there is no commingling of corporate monies, liability should not jump from that corp to yours for those

debts. However, the existance of those debts may interfere with the conducting of your intended joint venture, or might prevent you from collecting your share of the monies generated by that joint venture, if one of the other corporation's creditors (such as the IRS) gets wind of any such monies coming in. There are a substantial number of things you may do to protect yourself, but it would take too long to explain it in this response. Should you so desire, you may contact my office and schedule an appointment for a free consultation. Very truly yours, Andrew J. Campanelli (516) 746-1600 [email protected]