Legal Question in Business Law in New York

Tom incorporated his landscaping business with Tom being the sole shareholder, director and officer. Tom�s company has been sued by a customer, whose prize rose bushes and much of his lawn were severely damaged when one of Tom�s employees put weed killer in a sprayer that was supposed to have fertilizer in it. Tom called his attorney, Hector, to represent him in the lawsuit. When Hector asked for the corporate minutes, Tom said, �What corporate minutes?� Fearing that his company may lose the case, Tom decided to give its assets (trucks, trailers, mowers, etc.) to his son�s landscaping business and go to work for him. Hector advised Tom that his personal assets could be taken if he lost the suit, but Tom said, �No, don�t worry! I have a corporation; I have no personal liability!� Is this True?


Asked on 6/22/11, 4:11 pm

1 Answer from Attorneys
Michael Markowitz Michael A. Markowitz, PC

Q. Hector advised Tom that his personal assets could be taken if he lost the suit, but Tom said, �No, don�t worry! I have a corporation; I have no personal liability!� Is this True?

A. The lawsuit is only against the landscapping business. Therefore, a judgment would only affect the landscaping business.

However, plaintiff may commence another action against Tom alleging that the corproration was a nullity since Tom never followed corporate procedures. The plaintiff may also commence an action against Tom's son under the theory of fraudulent conveyance since assets from the judgment were transferred without sufficient consideration for the purpose of avoiding the payment of debt.

Mike.

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Answered on 6/23/11, 7:51 am


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