What are the possible consequences of not defending a lawsuit brought against a defunct LLC with no assets?

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What are the possible consequences of not defending a lawsuit brought against a defunct LLC with no assets?

A former LLC of which I was a member is being sued by a company claiming my organization owes them a substantial amount over $75,000. The LLC has been expired since 2009 and has no assets. If a default judgement is ordered on the LLC, what are some other possible problems this could create for me as a member?

Asked on October 15, 2010 under Business Law, Alaska

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

In theory, if you did not personally guarantee any of the LLCs debts, then a judgment against the LLC shouldn't affect you--they can only collect from the LLC itself. (If the LLC has been disolved, it's even questionable about whether they can sue it--there is nothing there to sue.) The reason I say "in theory" is that even if you did not personally guaranty the debts, if the money was taken out by you in some fashion or used to benefit you, the plaintiff may make and may be able to sustain the argument that you would then be personally liable, under possibly a theory of piercing the corporate veil (very difficult to make; basically that the LLC was pretextual), or you used the LLC to commit fraud against them. So if you personally took or benefited from these funds in some way, you should expect that they will try to reach you and, depending on the facts or circumstances, might have some possibility of doing so, even though in principal, members are not personally liable for any LLC debts they did not personally guaranty.


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