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Sorry, what obvious fraud?

And if the personal guarantees are going to go away once the business is a going concern, there's no problem with writing a shut-off date into the contract to make this explicit from the beginning, is there?

You can anonymously acquire a Nevada shelf corporation in a week or two. If you were able to just setup a merchant account without a personal guarantee, you could then trivially rack up a significant volume of fraudulent charges without any recourse. (The bank would literally not know who you are)

If you are a real business, you will almost certainly change credit card processors anyway to get better payment terms as your volume increases. The last startup I worked for changed at least three times as our volume grew.

I think we're talking at cross-purposes here. I don't think any of us are suggesting that merchant accounts should be made available without any checks at all.

It's reasonable to ascertain the identities of those running the company. While I'm no expert on US law, certainly here in the UK company directors have some basic responsibilities for acting responsibly and so forth and could be on the hook if they've been severely negligent, so you have that the moment you're dealing with the company itself.

But the point of a piercing agreement seems to be to put the company's controlling people on the hook personally even if they aren't grossly negligent and the business just doesn't work out. The fundamental point of setting up an independent legal entity is to sever that connection, and I personally believe that everyone should treat negotiations accordingly.

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