I want to start a company and purchase property under the company title. I will personally guarantee the mortgage under my SSN. My question is, if I ever fall under hardship personally and need to file bankruptcy or forclose personally can my personal creditors go after my company's assets that I personally guaranteed? Also, is there a difference in protection between an LLC and corporation with respect to this?
1 Answer from Attorneys
Many of your questions require an "it depends" response. Your personal goals and tax situation may have an impact on how to best form and manage the business entity.
A business entity, LLC or Corporation, has its own tax ID and, for all practical purposes, is a "person" in the eyes of the law. If you provide a personal guaranty of an entity debt, you are responsible in all respects for performing the obligations, including payment. Since you own the shares or membership interest in the business entity, they are generally subject to creditors claims as part of your "assets" to guaranty the debt.
Whether an LLC or corporation is better for you will require a more detailed examination by an attorney and an accountant. Both structures provide reasonable protection from general unsecured creditors in the event of a "no asset" bankruptcy.