Personal Guarantees

IRWIN KRAMER: When you sign on a dotted line you may want to give more than a simple autograph.

RICHARD BOOTH: When you are entering into an agreement on behalf of a company sign in the capacity as an officer. So if you are the president of the company, sign John Doe, President of ABC Company and be very careful not to simply sign your name.

Without identifying the capacity with which you are enacting an agreement you may find yourself personally liable, simply by virtually the fact that you have not been clear enough whether you were doing this act on behalf of the company or on behalf of yourself personally.

IRWIN KRAMER: But if you are running a start up company those you are contracting with may not let you off that easy.

RICHARD BOOTH: Many businesses that you deal with will require you to provide a personal guarantee in case the business defaults.

IRWIN KRAMER: That is normal and that is to be expected.

RICHARD BOOTH: If your business fails and you have signed as a guarantor on a lease for office space or a car loan you will have to pay it personally.

EDWARD JACOBSON: Now when a bank asks you for a personal guarantee, you on your side to negotiate on your side if you are married then you offer only your personal guarantee, you try to keep your spouse out of the personal guarantee.

RICHARD BOOTH: These things are always negotiable.

EDWARD JACOBSON: If it is just your guarantee then only those things in your name would be subject to your banks collection procedures.

RICHARD BOOTH: It is up to the potential creditor to ask you for the guarantee. If they do not ask they do not get them.