Dissolved LLCs

I am not an attorney, I am a judgment recovery expert (Judgment Broker). When an entity (a company, corporation, certain types of partnerships, or an LLC) dissolves for good reasons, for example they are really going out of business, that is unfortunate for everyone.

When an entity dissolves primarily to stymie creditors, there is a chance for the creditor to get repaid.

You can verify the status of an entity on the web site of your local state's Secretary Of State office.

State laws, or local state's business corporation laws, usually define how an entity is formed, as well as the duties of its directors, officers, and shareholders. Also covered is how an entity is formally dissolved, any possible liabilities, and its responsibilities to its shareholders and to its creditors, after dissolution. When an entity dissolves, it is important to determine the reasons it became dissolved.

One reason might be the entity had the money, but forgot or chose not to pay the required fees, and becomes administratively dissolved by the state's Secretary of State office. Some entities run out of cash and cannot pay the fees, and becomes dissolved.

Another reason could be the entity chose dissolution by following the state laws to apply for, and be granted a certificate of dissolution.

The time an entity can remain in business, after being administratively dissolved, varies by state. Some states have a statute of limitation and others do not. The dissolution procedures and laws may vary, depending on whether the dissolution was voluntary or not. Entity dissolutions are either defined by state laws, or a state's business corporation laws. In the laws, are often ways for a diligent and persistent creditor to perform discovery.

When an entity is administratively dissolved, that does not mean a creditor can no longer go after the assets of that entity. Even when an entity becomes administratively dissolved, that does not mean it is no longer in business.

Businesses can operate for years without applying for reinstatement. Being administratively dissolved does not mean the corporation has no responsibility to pay their creditors, or that a legal action cannot be brought against it (and/or its officers) in court.

A voluntarily dissolved entity is one that decided it no longer wanted to remain in business for any one of many reasons. It then followed all state and business corporation laws to properly shut the entity down. After this is accomplished, the former officers or their legal representatives, will apply to the Secretary of State for, and be granted a certificate of dissolution. It is easier to start an entity than it is to voluntarily dissolve one.

FindLaw.com has a very handy state-by-state link to corporation laws and codes: http://smallbusiness.findlaw.com/business-structures/business-structures-resources/biz-links-corporation-laws.html

Many times, attorneys specify entities in lawsuits without naming an individual shareholder or managing member that was responsible for the actions that caused alawsuit to be filed against the entity.

Making an individual ex-officer personally liable as an additional debtor to the judgment against an entity is not trivial. One must show a lot of proof that the individual committed acts that made them liable, and persuade a judge to sign a judgment.

Once it is proven to a judge that the corporate veil and protection that an entity offers, are evaporated due to actions of an officer, that individual can be named and added to the cause of action, and become a judgment debtor in the final judgment. During the lawsuit, assets may be frozen, by the use of preliminary injunctions, and other prejudgment remedies.

Once a judgment is final, adding the individual responsible is not an easy task. Often times, the expenses involved make it discouraging. At other times, all previous assets are long gone, and the individual involved makes themselves judgment-proof.

Absent a court order to the contrary or a personal guarantee, an individual is never liable for an entity's debt, either in or out of business.


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Mark D. Shapiro - Judgment Referral Expert - http://www.JudgmentBuy.com - where Judgments go to get Purchased or Enforced!