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Guaranty/More Info


Guaranty  
Additional Information 
 
If you are considering taking a guaranty, you should carefully review the financial status of the person or company making the guaranty (the "guarantor").  A guaranty is no better than the party or parties standing behind it.  If the guarantor does not have sufficient net worth to cover the company's obligations, the guaranty isn't worth very much. 

If you are considering making a guaranty for a company, think carefully before you do.  While the guaranty may be the only way for the corporation to arrange financing, it eliminates the primary benefit of corporation status:  limited liability.  After all, the whole point of forming a corporation is so that the founders can do business without being personally responsible for the business' finances. 

Sometimes, two or more individuals ("guarantors") are asked to give a guaranty.  In these cases, the guaranty of each of the guarantors is usually "joint and several."  This means that individuals are responsible not only for their portion of the obligation, but also for the entire amount.  The promisee (the investor, bank, or client) is not obligated to try to collect equally from all of the guarantors; the promisee may legally demand the entire amount from one guarantor.