What do we need to do about out business?

In general owners of a c-corp (i.e., shareholders) are not personally liable for the corporation's debts, even if the corporation does not have enough assets to liquidate and pay off its debts. So your snack supplier should not be able to come after you personally, unless you signed a personal guaranty of payment. One other possible theory for imposing personal liability is the "alter ego" (sometimes also called the "piercing the corporate veil") theory. Under this theory, the supplier can demand payment from you personally because you disregarded the corporate formalities so there is no difference between you and the corporation. In other words you ignored the separate corporate entity and treated the corporation's money as your own, so the vendor gets to ignore the corporation too. The corporate formalities requirements varies from state to state, so check with a local lawyer. However, the principle formalities that almost always have to be observed (and usually are not) are: - having annual meetings of the shareholders and board of directors (or in lieu of meetings - have written consents) to discuss and approve the corporate actions for the year and elect directors and officers; - maintaining corporate records, including a minute book that contains a written records of the minutes of all meetings and/or written consents; - maintaining a business checking/savings account separate from your personal accounts -keeping the corporate expenses separate from your personal expenses - i.e., only use the corporate funds to pay corporate expenses; and - refraining from draining the corporation and leaving it constantly undercapitalized - i.e., pulling money out despite making the company insolvent or not leaving enough so the company can pay its debts. No one factor is a determining factor. The court will review your particular facts and circumstances in deciding whether it will apply this theory and pierce the corporate veil. This answer is for informational purposes only and is not intended to provide legal advice or create an attorney-client relationship. Please consult with a local business attorney who is experienced with dissolutions, bankruptcy and business turn-arounds for legal advice that is tailored to your particular circumstances and facts. Good luck to you.

Attorney Flemenbaum gave a textbook perfect answer. So, I won't repeat anything. Just make sure you did all those things called "formalities" which many companies fail to do to save money, but which are absolutely crucial to preserve your separate corporate entity status. Now, some other considerations: (1) Many times, creditors require that you sign a personal guarantee. If they did this, and if you signed a contract in your PERSONAL capacity, separate from your corporate status, then yes they can hold you personally liable even if you did everything right. (2) You can file a bankruptcy for either the corporation or yourselves personally and, if you qualify, that will discharge your debts. (3) See a good CPA for advice on how to handle the debt. Under some circumstances, some debt can be a good thing. (4) If debt is not a good thing for you, then sell the business. There are folks out there who like having a little bit of debt out there to counterbalance their earnings, and having a business that would keep otherwise idle family members employed could be a good thing. These are my general observations provided for informational purposes only. Legal advice can only be given by an attorney licensed in your jurisdiction, in a personal consultation.