Only You Signed the Personal Guarantee? 5 Questions for a Business With Partners

A partner's ownership share does not automatically reduce the promise you signed to the creditor, which is why the guarantee and the owners' internal arrangements need separate review.

An individual guarantor may face a demand different from the company's obligation or the responsibilities assumed among partners. The business should identify those relationships before negotiating as though every owner carries the same exposure.

1. Read the Guarantee as Its Own Agreement

Obtain the complete signed guarantee and the contract it supports. Ask counsel which events trigger liability and whether the provider's demand falls within those terms.

A guarantee may be limited or conditional under its wording. The owner should not assume either unlimited exposure or complete protection from a heading used during the funding conversation.

Simply identify who signed and in which capacity. A signature for the company and a signature as an individual can perform different legal work.

The fact that other partners benefited from the financing does not itself establish what the creditor can collect from each person.

2. Separate Creditor Rights From Partner Obligations

The owners may have agreements concerning contributions, indemnification or allocation of liabilities. Those arrangements should be examined alongside the guarantee without assuming they bind a creditor that did not agree to them.

A partner's promise to share a payment can be relevant between the owners while leaving the creditor's contractual rights unchanged. Counsel needs to assess the documents and applicable law before the guarantor relies on that promise as a response to collection.

Have the attorney review and analyze the ownership agreement, any amendments and the circumstances of the financing approval. Identify whether the business or another partner made representations about responsibility that require separate attention.

Counsel should ensure potential conflicts are considered and ensure the individual understands who the lawyer represents. The company's preferred settlement and the guarantor's preferred settlement may not be identical.

The same issue can arise when partners disagree about closing, refinancing or funding an offer. A business decision affecting collateral or available cash can alter the guarantor's practical position.

This is extremely important before one owner transfers personal funds. The payment should follow an understood agreement about what it resolves and what reimbursement or contribution questions remain.

Keep those internal arrangements documented rather than relying on a shared memory of the meeting.

Identify who may authorize the company to accept an offer, particularly where the guarantor and other owners disagree about using business funds.

3. Delancey Street for the MCA Settlement Inquiry

Delancey Street offers a free confidential initial review focused on MCA distress and coordinates legal matters through independently licensed counsel. It is a debt settlement company rather than counsel automatically representing every partner.

Confirm eligible accounts, fees and the intended obligors in any proposed resolution. The review can assess available settlement resources.

Separate legal representation may be needed where interests differ.

4. Require the Release to Name the Guarantor

An agreement resolving the company's balance should not be assumed to release an individual guarantee. Ask what claims the creditor retains against each party after performance.

Read payment conditions and the consequences of a missed installment. A settlement funded by several owners needs clarity about who supplies each payment and what happens if one contribution does not arrive.

Resist the urge to accept a verbal assurance that everyone is covered. The written release should identify the relevant parties and obligations.

The arrangement can be extremely useful even where it requires difficult discussion among partners. The discussion is preferable to discovering the disagreement after a payment has been made.

5. Assess Personal Capacity Alongside Business Capacity

A guarantor considering personal funds should prepare a realistic account of household obligations as well as the company's needs. The largest available balance is not necessarily an amount that can be paid without creating another serious shortfall.

The IRS explains that canceled debt can create income, subject to exceptions and exclusions. The business and individual may require different tax assessments depending on the obligations and resolution.

Some questions will remain uncertain until counsel examines the full documents. Do not convert that uncertainty into an assumption that the partners' ownership percentages decide the legal result.

Delancey Street's initial review offers a starting point for the MCA settlement side. A sound resolution distinguishes the creditor's claim, the guarantor's exposure and the partners' internal responsibilities, leaving each promise in the agreement that actually governs it.