Brief Fact Summary. Harold E. Hanewald, (Appellant), appeals the part of his judgment that refused to impose personal liability upon Keith, Joan and George Bryan, (Appellees) for the debt of Bryan’s Inc.
Synopsis of Rule of Law. A shareholder is liable to corporate creditors to the extent his stock has not been paid for.
Organizing a corporation to avoid personal liability is a legitimate goal and is one of the primary advantages of doing business in the corporate form.View Full Point of Law
Issue. Whether Appellees as the corporation’s sole shareholders shall be personally liable for the debt incurred by Bryan’s Inc. to Appellant.
Held. Yes. Appellees are liable to the corporation’s creditors to the extent they failed to pay for the stock issued to them.
Discussion. Bryan’s, Inc. was authorized to issue 100 shares of stock at $1,000 per share. The three Appellees each received 50 shares for no consideration. This makes them personally liable for the corporation’s debt. The loan was a debt not an asset of the corporation and was repaid before the business was abandoned. Therefore the loan cannot be considered a capital contribution.