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Corporate Liability Situation?

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davsun

Guest
What is the name of your state? Washington State:

Here's the situation:

1) There are two "S" Corporations involved both created by the same individual. The 1st has been established and very successful for 12-15 years. The 2nd is new--approximately 1 year in existance and in its early stages of development.

2) The 1st Corporation is being used as a financial backing to fund the 2nd Corporation's marketing, manufacturing, etc. until it can stand on its own.

3) Since the 2nd Corporation is so new, there are no financial nor credit history for potential customers/investors to view.

The Problem:
We would like to mention the name of the 1st Corporation since it has excellent credit/financial history in order to ease any concerns that potential investors and/or customers may have regarding the credibility of this new corporation's product(s). However, we want to ensure that the 1st Corporation has absolutely ZERO legal obligations and the 2nd new Corporation will be 100% liable for any legal issues. Is there any particular way this must be done? Or is the fact that they are both separate S Corporation entities enough to ensure that they will be treated separately? Thank you for your help in advance!

Best Regards
 


JETX

Senior Member
I doubt that any creditors would consider the financial strength of Company A when determining the credit-worthiness of a completely separate company (Company B), especially if there is no credit obligation by Company A!!

No more so than if you were to apply for credit and give MY name as a "no obligation" guarantor.
 
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davsun

Guest
Washington State:

Halket: Thanks for the reply. However, the product(s) offered by company 2 are not everyday ordinary products you can pick up at any store. These can be fairly expensive AND some must be made by special order. They are very intricate and are actually based on a new technology capable of replacing previously used technology. With this in mind, we were thinking that many people/company's looking to utilize this technology may want to check the reputability of company 2--when there is no history. This may be discouraging to them--and us!! However, I can see your point. Thanks again for your input, it's much appreciated!

Best Regards
 

JETX

Senior Member
There is nothing wrong with Company B being offered as an indicator of quality and reliability for Company A. The problem comes when (as your first post said) you wanted to offer Company B's "excellent credit/financial history" to bolster Company A.... and to do this with no financial obligation.
 

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