Liability and an S corporation

I do computer consulting. I recently worked on a small business website. When I felt the client was overstepping the bounds of the contract and was not satisfied with the work to date I asked if they wanted to transfer the work to another developer. They did. Now they are sueing to get their money back. My corporation is an S type and there is little or no funds in the company. Even if they were successful in the suit there would be no money to recover. Am I liable as the sole shareholder?

Just because it is a subchapter S does NOT mean you are automatically personally liable too.


It depends if they sued you personally too, or if not, if they will later try to "pierce the corporate veil" based on your actions in operating the business. Also are you prepared to let the judgment stand and be hassled in various supplementary procedures in examinations to collect the judgment, or risk damage to your reputation, and then shut down the corporation just to avoid paying the amount?

Your opinion

The client got more then his money's worth. In my opinion I have a solid contract and what the lawyer is picking on makes little logical sense to me. But I'm not a lawyer. What's your opinion as a lawyer. If you had a potential client come to you for a $6,000 problem, and you worked it on a contingency basis. They want 1/2 now or will "pursue all legal means" to recover all $6000. The contract is slanted in the my favor because I supplied it. How far would you go? Thanks for all your thoughts, I'm going to go see a lawyer, but its hard to find those who know much about software development contracts and I like to hear lots of opionions before I jump into anything. Thanks again.