In Sutton v. Houllou, 2021 NY Slip Op. 08211, the Appellate Division, Second Department held that a party who entered into contract with a company that had not yet been formed cannot avoid its obligations under the contract. Conversely, the individual who signed the contract using the name of a company that had not yet been formed cannot avoid its obligations under the contract.
Thus, if you enter into a contract using the name of a not-yet-formed business entity, you may be personally liable to perform the obligations in the contract.
The appellate court stated that as “a general rule, a person entering into a contract on behalf of a nonexistent [business] entity may be held personally liable on the contract. . . . As a corollary, . . . that contract does not for that reason alone become void or voidable.”