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My corp has recently received a judgment that I cannot pay; can I dissolve the company and start anew w/o worry of the judgment

Miami, FL |

My corp provides graphic design srvc's and no client has a contract for continued service but there is repeating business from some clients (but relationship only exist from one order to the next). There are no outstanding accounts receivable worth collection efforts. There are also no assets worth enough to satisfy the judgment and all other equipment is under leasing agreements. The corp was previously shown as a managing member of another corp but I recently changed it b/c it was an incorrect indication. I would like to dissolve the corp. and just begin another one and continue business w/o worrying that the judgment-creditor can prevent me from continuing in the same business and from having my clients follow me to the new business (once notified that the previous company is done).

Attorney Answers 4

Posted

The really short answer to this inquiry is no. You cannot dissolve a corporation simply for the purposes of avoiding a liability and then re-form a new entity and carry on the business with the same assets and clients as the dissolved entity.

Legal disclaimer: I am licensed to practice law in the state of Washington and the answer provided above is for general information purposes only and should not be relied on as specific legal advice. This answer does not form an attorney-client relationship. You should consult with an attorney of your choice to fully advise you about your legal rights and obligations.

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9 lawyers agree

Posted

You may be able to file bankruptcy to discharge the judgment, but that depends on whether or not the judgment is actually dischargeable in bankruptcy. You should contact a bankruptcy attorney to see if that is an option for you.

The answer to this question is for informational purposes only and does not form an attorney-client relationship.

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6 lawyers agree

Posted

Attorney Camm is correct. Please see enclosed article (somewhat dated but still excellent) which explains the "Successor Liability" theory in Florida and how creditors could get at your new company.
http://www.clausen.com/index.cfm/fa/firm_pub.article/article/0fd676e0-3d27-4eee-8097-1f900dc534e9/Developing_a_Claim_of_Successor_LiabilityA_Practical_Guide_to_Recovery_When_Your_Primary_Target_Defendant_Has_No_Seizable_Assets.cfm

My answer is not intended to be giving legal advice and this topic can be a complex area where the advice of a licensed attorney in your State should be obtained. Please click "helpful" or "best answer" if my answer added any value or add a "comment" if you have more info for me to help you get a better answer.

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Posted

Well, I'm going to have to respectfully disagree with my colleagues on this one. I think that they have given you the academically correct answer, but probably not the real life answer.

As I'm sure we all know, companies go out of business in the type of scenario you describe all the time. The trick is to do so without any personal liability or exposure to other companies/assets. That is a bit of an art but can be done.

Yes, the company could discharge the debt through bankruptcy or an assignment for the benefit of creditors. However, it sounds to me like you would really rather avoid that expense and trouble. Depending upon the amount of the debt, insolvency proceedings may not be worth it to you.

So, what would happen if you simply left the company asset-less and focused on your other venture(s)? Well, the creditor could obtain a judgment against the company. Fine, but the creditor would not be able to collect on a judgment against a worthless company, right? So, the creditor might look for a way to attach that judgment to you personally or to your other business(es).

Whether or not the creditor might be successful would essentially depend upon the concept of "piercing the corporate veil." There are several criteria a court would consider in doing this analysis.

Now, there is no way to go into the subtleties of asset protection and all the different ways you might accomplish your goals here. I will simply say your desired outcome is very obtainable. You just need to hire an attorney with experience in this area.

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2 comments

John P Corrigan

John P Corrigan

Posted

Asker - review link to FL Statute dealing with "fraudulent conveyance" to educate yourself on what "could" happen if a creditor had a mind to pursue your new business assets that migrated to your new company: http://www.leg.state.fl.us/Statutes/index.cfmApp_mode=Display_Statute&Search_String=&URL=Ch0726/SEC106.HTM&Title=->2008->Ch0726->Section%20106#0726.106

John P Corrigan

John P Corrigan

Posted

sorry bad link first time http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0726/SEC106.HTM&Title=->2008->Ch0726->Section%20106#0726.106

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