Legal Question in Credit and Debt Law in Texas

Does a corporation's bad debt flow through to the S-corporation's owners persona

Does a corporation's bad debt flow through to the S-corporation's owners personal credit rating, once it goes to a collections agency?

I had a small company in Texas, where I had cell phone service under the corporate account for 5 years. Due to a screw-up with the service contract, the wireless carrier tried to bill me for $1200. I disputed the charges, they ignored me, and finally sent the matter to a collections agency. I have shut down that Texas corporation (but not dissolved it) and moved to Colorado where I am doing an entirely different business.

If I do not settle with the collections agency, can that bad corporate debt, in any way flow through to damage my pristine credit record as an individual, or any other S-corp I may have?


Asked on 9/13/02, 1:35 pm

1 Answer from Attorneys
Roger Johnson Roger D. Johnson, P.C.

Re: Does a corporation's bad debt flow through to the S-corporation's owners per

Generally, shareholders are not personally liable for corporate obligations. The tax status [S-Corp] is not a factor. If the process of "shutting down" the business did not result in an effective assumption of the corporate debt by the shareholder, then the collection agency has no legal basis to pursue the shareholder for a corporate debt. If the collection agency wrongfully reports negative information attributable to the shareholder, the agency may be subject to damages.

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Answered on 9/13/02, 3:48 pm


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