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How to avoid personal liability in operating your small business.

According the U.S. Bureau of Labor Statistics most new small businesses will fail within the first four years. That’s a chilling fact, so it’s important to make sure if it happens to your small business that you don’t have any personal liability for the debts of the corporation, limited liability company, or limited partnership. If you’re a sole proprietorship or general partnership it won’t make any difference as these types of ownership don’t provide any liability protection to the owners. For an interesting story that clearly illustrates the idiocy of operating a business as a general partnership, read my novel, Cash Call, a legal horror story about a failed restaurant franchise.

Although operating as a corporation or limited liability company can protect the owners from personal liability, it’s not automatic. For example, a potential client recently came in complaining that he was being harassed by an old creditor from his bankrupt corporation. After quizzing him for awhile I learned that the creditor involved was the county and the debt was for personal property taxes. Ordinarily a corporate bankruptcy would have taken care of that liability but after examining the records I discovered the tax bill was in my client’s name. This was incorrect but since my client hadn’t got it corrected he had a problem. Even if he had filed a personal bankruptcy he still might not escape the debt since the claim of a governmental entity is a priority debt and not necessarily dischargeable.So, it’s imperative that the small business owner carefully check every bill that comes in and make sure it is in the name of the corporation or LLC and don’t leave off the “Inc.” or “LLC” on the name as that’s what protects you. If those three magic letters are left off there could be an assumption that the business is a DBA (doing business as) of the individual owner or owners.

Another problem is that many creditors insist on the owners guaranteeing their debt. Although the easy thing to do is to cave in and sign the guaranty, it’s a very bad idea. There are usually many vendors to choose from, so it’s usually not hard to find one who won’t insist on a personal guaranty. Banks and landlords are more difficult, but if you shop around and let these creditors know there won’t be any personal guarantees many times these creditors will back off. Remember, creditors will always try to get as much collateral and as many personal guarantees as they can, so stand your ground.

To find out more about what can go wrong in a small business and what to do about it, check out William Manchee’s new non-fiction book, Go Broke, Die Rich, Turning Around the Troubled Small Business. Go Broke, Die Rich and Cash Callare available in paperback, audio MP3, and for audio download at



Welcome! This is my site devoted to helping entrepreneurs figure out what’s wrong with their small businesses, defending them from angry and relentless creditors, and returning them to profitability.  It’s a sad fact, that most new small business won’t last five years.  In many cases the startup small business is doomed from day one because of mistakes that are made early on in the establishment of the new enterprise.

Most of my adult life I have owned one or more small businesses including my own law practice and being a partner in Top Publications, a small publishing company.  In addition I have represented small business owners for over thirty years and helped them through every conceivable problem.

Since I can’t sit down with everyone, I wrote a book on this subject, GO BROKE, DIE RICHIn it I share dozens of stories of the struggles of entrepreneurs just like you. Each story is inspired by actual cases in which I was involved over the last thirty years. From these stories I relate my observations about the causes of small business failures, how they can be avoided, and how the small business can be turned around and made profitable.

For the entrepreneur already in trouble Go Broke, Die Rich provides a comprehensive guide to defending the small business under attack including litigations strategies and the utilization of such tools as debt consolidations, workouts, bankruptcy, and reorganization.

My book and this blog isn’t meant to replace your own attorney or accountant. You shouldn’t rely on anything I say without first consulting your own attorney or accountant. You will need your own professional help from practicioners who you have personnally met, know your particular situation, and practice in your jurisdiction. My book, however, will provide practical guidance in selecting attorneys, accountants, and business consultants to assist you in operating and defending your small business.

Written as a light, entertaining read Go Broke, Die Rich is designed to be read cover to cover. Although packed full of valuable information it is not designed to be a manual but a collection of case studies and observations that should prove valuable to any entrepreneur who reads it.

Feel free to comment or ask questions if you feel like it. If I can help you out, It would be my pleasure.