Pre-Incorporation Liability for Iowa Entrepreneurs and Startups

So you’ve come up with the next “big thing,” and you’re excited, anxious, and busting at the seams to get started.  All natural feelings, but before getting too far down that exciting path, be careful not to put your cart before the legal horse.

You have probably heard about some of the many legal protections that Iowa business owners receive by forming a corporation (e.g. limited liability), but you may not have heard that before the corporation is legally formed you are likely “on the hook” for any liabilities that arise (debt claims, infringement claims, personal injury claims, etc).  Specifically, Iowa law provides that if you act or purport to act on behalf of a corporation that has not yet been incorporated (i.e. legally recognized by the state), you are personally liable for all liabilities created while so acting.  See Iowa Code Section 490.204.  In other words, just because you intend to create a corporation or because you have filled out the paperwork to do so, if the corporation has not been legally recognized by the state, you could be held personally liable for any claims that arise. These claims include trademark infringement, copyright infringement, and patent infringement to name a few.  Consequently, before you go out and act or purport to act on behalf of a corporation you intend to create, saddle up that horse and get your legal affairs in order.  After all, in Iowa, incorporating is relatively inexpensive, easy, and quick.  To get started and learn more, you should consider contacting a licensed attorney.


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About Matthew McKinney

Attorney focused on civil and commercial litigation.
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