I own a small business that has failed. My landlord, vendors, and clients are going to sue me. Is it to late to become a LLC?

Asked 3 months ago - Rancho Santa Margarita, CA

I dont have anything left but what about my future?

Attorney answers (5)

  1. Shawn Regis Jackson

    Contributor Level 15

    6

    Lawyers agree

    Answered . Yes, it is too late if you intention is to protect your personal assets from the past debt. A "legal entity" does not work in retrospect...so, as per the lease and vendors, you agreed to be personally liable...I would suggest that you contact an attorney of your choice to begin the debt negotiation on these matters.

    Shawn Jackson Business Attorney

  2. Michael Charles Doland

    Contributor Level 20

    6

    Lawyers agree

    Answered . What you are referring to in law is called a "fraudulent conveyance" and if you are already insolvent and threatened with lawsuits, it's too late. You landlord won't consent to the assignment, and your creditors have relied on your personal assets.

    A consultation with a bankruptcy lawyer so you can protect the maximum amount of assets would be in order.

    The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may... more
  3. Kevin Arnold Spainhour

    Pro

    Contributor Level 15

    4

    Lawyers agree

    Answered . As both attorneys stated, it is too late for that. It sounds like you may want to discuss the bankruptcy option. Bankruptcy can really help relieve the stress that you must be feeling. Most of us attorneys that practice Bankruptcy offer free consultations. You should take advantage of that.

    Kevin A. Spainhour, Esq.
  4. Robert R Beauchamp

    Contributor Level 7

    3

    Lawyers agree

    Answered . Yes, it is too late. What you need to do is negotiate with the creditors. Were any of the debts secured?

  5. William Edward Gschwind

    Contributor Level 7

    1

    Lawyer agrees

    Answered . The other attorneys' responses all provide sound advice; you can't go backwards. The only thing I might add is related to your options at this point.

    Bankruptcy is a remedy designed to provide you with breathing room to start fresh and to create some order and control over creditors trying to get at your assets. But bankruptcy is not inevitable, nor is it something that needs to be done right away. Your conversations with a bankruptcy attorney should include alternatives that reflect whether your creditors are likely to pursue collections, whether you have any assets requiring the protection afforded by bankruptcy, and when you should file to provide you with the best protection. Filing draws a line in the sand and protects assets from debts up to the date of filing, but may not protect you from debts that arise after filing. Once you file, you must wait a number of years before you can file again (not something anyone wants to do, but serious unexpected events can occur, such as a serious health issue). If you haven't recovered financially and incur additional debt, you may not have a remedy to help.

    Finally, hang in there. It is never easy to go through a business failure and the future may look bleak. Seek sound counsel who understands what it is like to suffer a small business failure and help you with the confusion you may be experiencing as you figure out what to do now and how to move forward.

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