What Do You Mean "I'm Responsible!" I'm Just an Employee!
It's hard to count the number of times a client or potential client has contacted me about receiving letters from business creditors stating that the client is responsible for certain debts of the company he or she used to work for. Why? Because the employee wanted to help out the company and signed a guaranty so the company could lease some piece of equipment or lease some property.
It is certainly not unusual for business owners to guaranty the debts of their business, and these guaranties usually appropriate. But, It is foolish for employees and minority shareholders to guaranty business debts. Why do people do this? They believe that everything will be fine and after all, they are just helping out the company.
I advise people that if you can't control who gets paid, don't guaranty anything. One victim I talked to had purchased computers (on credit) for his employer about 3 weeks before the owner disappeared with all of the assets. Another was stuck dealing with claims from a leasing company after the company went out of business.
If your employer can't afford the equipment it needs to operate, how long do you think they will be in business? If the employer needs employees to guaranty debt, what are the long term prospects? Minority shareholders or members of an LLC are in a slightly different situation, but not by much. I represented a party that was a minority shareholder, was fired from the company, and then had to deal with ten's of thousands of dollars in debt he guaranteed after the business first refused to pay, then sold all it's assets and eventually went out of business.
Simple Rules of Success. Don't guaranty debts of another person or company (Family Excepted.) If you must - for whatever reason - make sure you have the control necessary to assure that the debt you are guarantying is paid from whatever revenue there is. (Note that controlling who gets paid is no guaranty that the problem will be solved if the company goes out of business.)
Another strategy is to insist on receiving personal guaranties from the majority owners of the business. Asking the owners to guaranty payment to the employee in the event of default by the company should be informative. If the majority owners will not sign - why should the employee?
Employees and minority shareholder beware!
Well done.