Personal Liability – Corporate Officer Liability

Are you contemplating closing or have you closed out your business? If so, it is important to recognize that sales and use tax liabilities generally do not die with the business closure.

personal-liability-iconWith revenues down, nearly every state has significantly expanded its efforts to pursue liabilities of closed out businesses. In many instances, the asserted liability may not even be established until after the business ceases to operate. Although statutes vary from state to state, most states are not permitted to pursue an individual for the liability of a business entity (corporation, LLC, etc.) unless they can show that the individual was a “responsible person” who willfully failed to remit taxes that the entity had collected. The burden is generally placed on the state agency to prove certain elements are present before an individual can be held responsible. Unfortunately, states often take a fast and loose approach to issuing personal liability billings, resulting in a high volume of erroneous assessments.

Our firm has successfully defended dozens of individuals against personal liability assessments issued by state taxing agencies, saving these clients millions of dollars in undue tax. We’ve obtained such favorable judgments in the majority of the personal liability cases brought against our clients. †

To read an article by one of our principals addressing sales and use tax personal liability in California, click here.

It is imperative that you fully understand your legal rights when dealing with personal liability matters. Contact our firm immediately to discuss your personal liability case or concerns.

Common Misconceptions

  • Filing personal or corporate bankruptcy will always excuse the payment of sales and use taxes owed by the business;
  • Only corporate officers, members or partners of the organization can be held personally liable;
  • The state will not pursue an individual if he/she does not have sufficient assets to satisfy the outstanding liability;
  • The state can only pursue an individual for taxes which were actually collected;
  • There is always someone that can be held personally responsible for the outstanding liability of the business organization…;



Industry: Personal Liability/ Corporate Liability
Procedural Summary: Appeals

Business man walking a tightrope

Reduction: $1,419,356.16
(100% Reduction)

After the technology business he worked for sold its assets, our client, and former CFO of the company, was pursued personally for the asserted unpaid liability of the corporation. The state’s corporate collection unit vigorously pursued our client for the asserted liability. Despite significant efforts put forth by the state, our firm ultimately obtained a favorable ruling through the appeals process which eliminated the entire liability.

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† Past results should not be construed as a guaranty or an indication of the results available in any particular case.