Sara decided to incorporate her business under the name Loro,Inc.Before Loro was incorporated,Sara signed a contract in the name of Loro,Inc.to lease a storefront.Sara did not tell the other party that Loro was not yet formed.Sara is personally liable on the lease.

Question

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Since Loro, Inc. was not yet incorporated at the time the lease was signed, Sara signed the contract in her personal capacity. Therefore, she is personally liable for the lease, not the newly formed corporation. It is important to wait until the business is legally incorporated before entering into contracts or agreements in the business's name to avoid personal liability.

Sara Decided to Incorporate Her Business Under the Name Loro,Inc