Who is personally liable for contracts entered into before the incorporation of a corporation or LLC?

The individuals who entered the contracts before the incorporation of a corporation or LLC bear personal liability for those contracts. This is because, prior to the formation of a corporation or LLC, there is no distinct legal entity to assume liability; therefore, the individuals involved must take responsibility for any agreements made.

When individuals form a corporation or LLC, they establish a separate legal entity that can enter into contracts and incur liabilities. However, contracts made before the new entity is officially recognized do not benefit from the protection of the corporate shield, which limits personal liability for the entity’s debts and obligations. As a result, the individuals who signed the contracts are personally bound by their commitments and can be held liable for any breaches or issues arising from those agreements.

This principle emphasizes the importance of incorporating or formally establishing a business entity before entering into contracts to avoid personal liability.