Company is deregistered, can I sue its founders for non payment of invoices directly
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Company is deregistered, can I sue its founders for non payment of invoices directly
I’ve provided design drawings to 2 property developers. They failed to pay the invoices and when I asked for the address to where to serve the court documents. One of the developers, a lawyer, wrote me back ‘serve the company at its registered address’ All I could find is that it’s been deregistered. I was wondering if I can serve the documents to this guys’ law firm, and sue him and his partner directly? Thanks
Asked on May 6, 2019 under Business Law, Alaska
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 4 years ago | Contributor
If the company was a sole proprietorship or general partnership, you can sue the individual owner(s), because in those types of businesses, the owner(s) is(are) the business and are legally liable for its debts.
If the company was, as is more likely, an LLC or corporation, there is a short answer and a long answer, but neither is good for you.
Short answer: the law specifically protects the owners (members or shareholders) of LLCs and corporations from being responsible for or being sued over the company's debts--in fact, that's pretty much the main point or purpose of LLCs and corporations. So in this case, you cannot sue the owners.
Long answer: in certain cases, the law does allow you to "pierce the corporate veil," or bypass the LLC or corporation liability protection, IF you can prove that the company was essentially used to commit fraud on creditors, vendors, contractors, customers, etc. You have to be able to show one or more of several things, such as that the company was intentionally underfunded, so it could never reasonably pay its obligations; or that the company owners moved assets away from the company when they knew it faced debts or lawsuits, to defraud the people seeking money; or that the company never had any real independent existence (e.g. it's money and assets were so co-mingled with the money and assets of its owners that there was no real distinction between company and owners). None of these showings are easy; all of them typically require fairly extensive litigation and "discovery" to get the information you need and prove the case; and winning is not certain, because the presumption or bias in the law is that an LLC or corporation is valid and the owners entitled to protection--you have to overcome a presumption in the owners' favor. Unless you are talking about many tens of thousands of dollars at stake, it it is likely not economically worthwhile to pursue this course.
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