This is a question that comes up in the due diligence process and is an important one to consider as you fulfill your lien and corporate search requirements when qualifying new candidates for loans and also as you monitor your perfected security interests going forward. When conducting a search on a legal entity, such as a Corporation, LLC or Trust, should a search be conducted on the officers, members and/or trustees?

The answer depends on the relationship of the individual with the entity.

Generally, there is no need to search the officers, members or trustees of these legal entities. They are considered legal operating entities with the ability to conduct business on their own. However, if a business was ever operated by the officers, members or trustees as sole proprietors then a search may be warranted to uncover possible liens created against the assets by the sole proprietor. A rule of thumb to follow is to err on the side of caution and ask your seller(s) the correct fact finding questions to determine if the conditions that would warrant a search on the individuals in these instances is warranted.

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