May My C Corp break a commercial lease that does not have a personal guarantee due to business loss?

UPDATED: Oct 1, 2022

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May My C Corp break a commercial lease that does not have a personal guarantee due to business loss?

My C Corp has a capital loss. If it continues to do business that
loss will grow due to unavailable supply. The CCorp has a 3 year
commercial lease that does not have a personal guarantee. I tried
to offer assets to the landlord but he is playing hardball. If the
Corp closes will I be personally liable? Will the Corp?

Asked on March 25, 2018 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

1) If you signed the lease in your personal capacity or as yourself (and not as, say, "President of C-Corp."), you would be personally liable.
2) If you signed the lease on behalf of the corporation, so that the corporation is the tenant, then the corporation is liable: if it breaks the lease, it will remain liable for all rent due under it for the remaining length of the lease. 
3) Generally, if the corporation is the tenant, then the corporation's owner(s) and officer(s) are NOT liable for the corporation's debts or obligations--that's the whole point of a corporation, to protect its owners and managers from liability.
4) However, IF you have not respected the corporation's independent existence--for example, you comingle corporate and personal money; you use corporate funds to pay personal debts or expenses--it may be possible to "pierce the corporate veil," bypass the corporate protection and hold you liable. This rarely done or successfully, but is possible if you treated the corporation as an extension of yourself instead of as a separate entity with it's own interests and existence.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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