If you have a judgment against someone who owns an LLC or against a corporation as a whole, it’s important to look for assets within the debtor’s company. An LLC and its owner are separate entities. If you have a lawsuit against a person that owns an LLC, it’s imperative to establish the connection to prove their involvement.
Here are steps you can take to find out if your debtor owns any LLCs:
Check the Secretary of State website for the state where your debtor is located. The Secretary of State’s office in most states maintains registration information for most business entities, including LLCs. On the Secretary of State website, you should be able to search for all business entities by owner name and/or address.
Review the names of officers and directors on corporate filings with the Secretary of State. Oftentimes, people who are involved with corporations will list their home address as their corporate address on these filings. When you find that one individual owns several different companies, that can be a sign of hidden assets or misconduct.
Do an internet search using your debtor’s information as keywords. You can often find valuable information about your debtor or their corporate affiliations by doing this simple step. You might even learn something useful by looking at social media pages such as LinkedIn.
What is piercing the corporate veil?
Piercing the corporate veil means that a creditor can hold the company itself responsible for the debts or actions of the company’s directors, officers, or shareholders. If a creditor can pierce the corporate veil, it can recover from those individuals. Why is that important? To a creditor seeking to collect a claim against an LLC or corporation, piercing the corporate veil provides an additional way to collect from someone other than the business. To pierce the corporate veil, you’d have to show some sort of wrongdoing on behalf of those individuals — fraud or concealment of corporate affairs.
Piercing the corporate veil isn’t always used as a means to enforce claims. In many states, it’s not allowed in certain situations such as bankruptcy and insolvency. Another state has even gone so far as to limit piercing the corporate veil to cases where it’s used “as part of an attempt to evade creditors.” And in some states, piercing doesn’t even apply at all. It also doesn’t necessarily mean that those individuals are personally responsible for their corporations’ debts; in most cases, it just means they’re held legally liable for them.
Discovering assets is not always an easy task, but it is necessary to ensure that you get your money. You may want to conduct a search before suing or after you’ve filed your claim. Pre-litigation planning is key to making sure you don’t miss any practical means of recovery. Flush out hidden assets by conducting thorough searches of financial records. When you discover that the defendant owns an LLC, you may be able to sue the company. When you do, it can help to know who will be liable for the debt. By seeking the services of a private investigation agency that specializes in corporate asset search, you’ll be one step ahead of other plaintiffs and make sure you have a strong case against your debtor.