Labor Code 226 requires nine specific items on every California pay stub — hours, rates, employer’s legal name and address, all of it. Missing items are $50–$100 penalties per pay period, capped at $4,000, no proof of harm needed for knowing violations.
Pull your last stub right now and count to nine.
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The corporation can die cleanly. The guarantee doesn’t die with it — and for most small business owners, the guarantees are the insolvency problem. Here is the honest map.
Where they hide. Owners remember guaranteeing the SBA loan. They forget the commercial lease (often the largest), the equipment finance agreements, the business credit cards (nearly all carry personal liability), vendor credit applications signed years ago with guarantee language in the boilerplate, and merchant cash advance agreements. The first task of any wind-down is a guarantee inventory: pull every credit agreement and read the signature blocks.
What creditors must still prove. A guarantee is a contract, enforced like one — subject to a four-year limitations period under CCP §337, to defenses of fraud and unconscionability, and to California’s rich suretyship law in Civil Code §2787 et seq., including exoneration doctrines where the creditor materially altered the underlying obligation or impaired collateral without the guarantor’s consent (§2819). Guarantees waive many of these protections by their terms — but waivers must be examined, not assumed effective.
Leases are their own universe. A landlord suing on a guaranteed lease must still mitigate: Civil Code §1951.2 limits damages to amounts the landlord could not reasonably avoid by reletting. The guarantee of a $300,000 remaining term is not a $300,000 debt if the space relets in four months.
The negotiation reality. Guarantee creditors settle — routinely and steeply — because the alternative is chasing an individual whose assets are shielded by California’s exemption scheme: the median-price homestead under CCP §704.730, protected retirement accounts, wage garnishment caps. A guarantor who presents an accurate financial disclosure showing exempt-heavy assets, alongside a credible lump-sum offer, is negotiating from statute, not sympathy.
Timing discipline: the catastrophic pattern is guaranteeing new debt to float a dying business — converting dischargeable corporate losses into personal ones. The moment the honest forecast says the business won’t recover, the rule is simple: no new guarantees, no personal cash in, and professional advice on sequencing the wind-down. Owners who exit early keep their houses. Owners who exit late fund one more quarter and keep the lawsuits.
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Win a judgment — support arrears, small claims, wage award — and the sheriff becomes your collection agency. Wage garnishment takes up to 20% of disposable earnings (more for support). A bank levy sweeps the account the morning it lands.
Judgments don’t collect themselves. The writs are simple. File them.
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The assignment for the benefit of creditors sounds exotic until you watch one run. Here is the lifecycle of a well-executed California ABC, from decision to final distribution.
1. The board decision. Directors resolve that the company is insolvent and that an orderly liquidation serves creditors best, and authorize a general assignment. Corporate formalities matter here — the resolution, and shareholder approval where required for a disposition of substantially all assets under Corporations Code §1001, get documented cleanly because they’ll be examined later.
2. Selecting the assignee. A professional fiduciary firm — this is a specialized industry — is chosen and negotiates its fee structure. Due diligence on the assignee is the owner’s last major decision; after assignment, control passes completely.
3. The assignment agreement. The company executes a general assignment transferring all assets — equipment, receivables, inventory, IP, causes of action — to the assignee in trust for creditors. From this moment, the company’s role is cooperation, not control.
4. Notice to creditors. The assignee notifies all creditors, who submit claims by a bar date. California codified key mechanics — see CCP §1802 — including creditor notice requirements.
5. Liquidation. The assignee sells assets — frequently through a pre-negotiated sale that closes within days of the assignment, preserving going-concern value — collects receivables (with statutory authority under CCP §1800 to pursue preference-style recoveries in some circumstances), and reduces everything to cash.
6. Distribution by priority. Secured creditors from their collateral; then administrative costs; then priority claims — employee wage claims carry statutory priority, and unpaid wages remain a personal minefield for owners regardless (Labor Code §558.1 imposes individual liability on owners for certain wage violations — pay employees first, always); then general unsecured creditors pro rata.
7. The owner’s parallel track: negotiating personal guarantee settlements with lenders and landlords while the estate winds down — guarantees survive the ABC and are the real endgame for most owners.
Timeline: a pre-packaged asset sale can close in two weeks; full administration typically runs several months. Compare that to a year-plus of Chapter 7 while value evaporates. Orderly beats chaotic, and early beats late — every time.
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