Suing A Dissolved Entities

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, it is bad for everyone.

When an entity dissolves just to thwart a creditor, there is a possibility for the creditors 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 statutes, usually specify how an entity is formed, as well as the duties 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 can become important to determine the reasons it became dissolved.

One reason could be the entity had the money, but forgot or chose to not pay the necessary fees, and was administratively dissolved by a 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 voluntarily agreed to dissolution by following the state statutes to apply for, and be granted a certificate of dissolution.

How long 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 covered by state laws, or a state's business corporation laws. In the laws, are sometimes ways for a diligent and persistent creditor to perform discovery.

When an entity is administratively dissolved, that does not mean you 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 in business.

Businesses can go on 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 court.

A voluntarily dissolved entity is one which 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

Many times, attorneys name entities in lawsuits without naming the individual shareholder or managing member who was responsible for the actions that led to thelawsuit to be filed against the entity.

Making an individual ex-officer personally liable as an additional debtor to the judgment against the entity is not easy. One must provide a substantial amount 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 may be named and added to the cause of action, and become a judgment debtor in the resulting judgment. During a lawsuit, assets may be frozen, by the use of preliminary injunctions, and other prejudgment procedures.

Once a judgment is final, adding the individual responsible is no easy task. Often times, the expenses involved make it prohibitive. At other times, all previous assets are long gone, and the individual liable becomes 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.