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Submitted 2011-05-28 23:15:08
I am not a lawyer, I am a judgment referral expert (Judgment Broker). When an entity (a company, corporation, certain types of partnerships, or an LLC) dissolves for valid reasons, for example they are really closing down their business, that is unfortunate for everyone.
When an entity dissolves just to thwart creditors, there is a possibility for the creditor to get repaid.
You can check the status of an entity on the web site of the local state's Secretary Of State office.
State laws, or local state's business corporation laws, usually specify how an entity is formed, and the duties of all of its directors, officers, and shareholders. Also specified is how an entity is formally dissolved, the 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 could be the entity had the money, but forgot or decided not to pay the necessary fees, and becomes administratively dissolved by a state's Secretary of State office. Some entities run out of money and cannot pay the fees, and gets dissolved.
Another reason could be the entity chose dissolution by following the state laws to apply for, and be granted a certificate of dissolution.
How long an entity can stay 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 covered by state laws, or the 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 the entity. Even when a business becomes administratively dissolved, that does not mean it is no longer doing business.
Businesses can operate for years without applying for reinstatement. Becoming administratively dissolved does not mean the corporation can avoid the responsibility to pay their creditors, or that a legal action cannot be brought against it (and/or its officers) in a 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 done, 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
Too many times, lawyers specify entities in lawsuits without naming the 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 performed 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 because of the actions of an officer, that individual can be named and added to the cause of action, and become a judgment debtor in the resulting judgment. During the lawsuit, assets may be frozen, by the use of preliminary injunctions, and other prejudgment procedures.
Once a judgment is awarded, adding the individual responsible is not an easy task. Often times, the expenses involved make it prohibitive. 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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By: Mark Shapiro
I am not a lawyer, I am a judgment referral expert (Judgment Broker). When an entity (a company, corporation, certain types of partnerships, or an LLC) dissolves for valid reasons, for example they are really closing down their business, that is unfortunate for everyone.
When an entity dissolves just to thwart creditors, there is a possibility for the creditor to get repaid.
You can check the status of an entity on the web site of the local state's Secretary Of State office.
State laws, or local state's business corporation laws, usually specify how an entity is formed, and the duties of all of its directors, officers, and shareholders. Also specified is how an entity is formally dissolved, the 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 could be the entity had the money, but forgot or decided not to pay the necessary fees, and becomes administratively dissolved by a state's Secretary of State office. Some entities run out of money and cannot pay the fees, and gets dissolved.
Another reason could be the entity chose dissolution by following the state laws to apply for, and be granted a certificate of dissolution.
How long an entity can stay 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 covered by state laws, or the 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 the entity. Even when a business becomes administratively dissolved, that does not mean it is no longer doing business.
Businesses can operate for years without applying for reinstatement. Becoming administratively dissolved does not mean the corporation can avoid the responsibility to pay their creditors, or that a legal action cannot be brought against it (and/or its officers) in a 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 done, 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
Too many times, lawyers specify entities in lawsuits without naming the 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 performed 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 because of the actions of an officer, that individual can be named and added to the cause of action, and become a judgment debtor in the resulting judgment. During the lawsuit, assets may be frozen, by the use of preliminary injunctions, and other prejudgment procedures.
Once a judgment is awarded, adding the individual responsible is not an easy task. Often times, the expenses involved make it prohibitive. 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.
Author Resource:->??Mark D. Shapiro - Judgment Referral Expert - http://www.JudgmentBuy.com - where Judgments go to get Purchased or Enforced!
Article From Next Level Articles
Source: http://www.nextlevelarticles.com/Art/268645/24/Judgment-Enforcement-And-Dissolved-Corporations.html
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