Legal Question in Business Law in California

Re: Llc

I'm sure you would. Attorneys on this public site are not allowed to give actual legal advice without establishing an Attorney/Client relationship. All you're going to get is general guidance about how to find the answer to your questions. In your case, you'll have to consult with counsel, who will have to determine all the facts and documents and law that apply, and then give you advice and answers to your questions. You're asking for free advice on which to rely to make critical business decisions that could result in lawsuits and legal problems. That just isn't going to happen here, nor would it be wise of you to do so, even if it did. If you're interested in doing it right, feel free to contact me if in SoCal.

Re: Llc

LLCs are distinct entities from their owners and other LLCs, and the obligations of one are not usually the responsibility of the other.

Having said that, I hasten to add that there are circumstances in which the entity distinction is ignored, bridged over or pierced. Such situations are somewhat unusual but not extremely rare.

The most important of these is what is called "piercing the corporate veil," which applies more or less the same to LLCs as to corporations. This principle, also called the "alter ego" theory, holds that if the owner(s) of a corporation don't regard it as a separate entity themselves, by (for example) consistently disregarding the distinction between corporate and personal funds and property, then the courts will also disregard the distinction in order to prevent or correct a fraud on the corporation's creditors.

Another instance of personal liability arises when the owners of a corporation or LLC close it down and transfer its remaining assets to themselves, instead of liquidating the assets and paying the proceeds to creditors. The officers, directors and stockholders have to be LAST IN LINE at the feeding trough when the business closes its doors. Money, inventory, vehicles and other property including trade secrets and assets of ANY kind owned by the business must be used to pay off creditors before the former owners can take a dime, or a paper clip.

In a sense, you're maybe a bit safer if there is a judgment against the previous LLC (and not including you) than in the absence of a judgment, because the plaintiff has had its day in court, and if you were an obvious target, you'd have been named, sued and perhaps have lost and be a judgment debtor as well. The personal threat is probably diminished under such circumstances. You do, however, need to be especially careful in winding up and liquidating an LLC that is a judgment debtor. There is a lien on all its assets. Further, don't be lulled into thinking that applying to the Secretary of State to dissolve your LLC ends the story. A dissolved LLC continues to exist for purposes of liquidating and winding up, and can sue and be sued, until it has no assets and its liabilities are paid to the extent of available assets.

Finally, precise and detailed answers are generated by competent law firms upon payment of five-figure retainers and going over boxes of client data over a week's time. The answer would probably run thirty or forty pages - but it would be precise and reliable, tailored to the client's particular circumstances, not like the generalities we post on our bulletin board.