LLC and civil suit

[justsomeone]

What is the name of your state? MICHIGAN

Hello back in 2004 I quit doing business as a Michigan LLC Corporation

I could not pay off the remainder of the Yellow Page advetising. Recently (3 weeks ago)
I recieved a complaint for $10,000 (inflated above the actual amount) I responded to the complaint and stated the business does not exist. They are requesting a summary Judgement for the amount plus court cost citing citing no legal or factual matter in dispute.

The law firm cited that a corporation can't represent itself as well. My questions are...

Can an officer represent a corporation in a civil suit?
Can a non existent company be sued or can I request that that the case be dismissed based on the Michigan Court Rules MCR 2.116 (C) (7)?
Can I personally be sued for this? I have never made a personal Guarantee on this account.

I CAN"T AFFORD AN ATTORNEY! So my only options are to go commando.

 

[Kevin Donahue]

I hope someone who actually knows what their talking about responds to you because I'm going through the same thing. What can they gain by going after your LLC if it's under? They only worry I'd have (and this is what I'm going through) is if they try to get around the LLC and go after you personally.

 

[justsomeone]

I am so confused also but can't afford an attorney and can't represent myself either? This is crazy. I will just show up in court and plead my case.

 

[Kevin Donahue]

I agree, what other defense do you have? In order to break a corporatioin it's not very easy, and it takes money to do that. As long as your corporation is legal and all the paper work has been filed I can't see them getting around it. On the other hand, if they DO get around it and try to sue you personally I would think your howmowners insurance would pick up the defense since you'd be getting sued personally.

 

[Rexlan]

Caution : The poster offering up the BS was under insured, damaged property, and is looking to hide behind the paper corp. to escape liability. You however, may have a legitimate issue, but not protection because of your corp. so don’t go down that path.

"Most" Yellow Page advertising contracts are discharged if the business is terminated AND the telephone number/s associated with that advertising are disconnected, AND the business is closed (not just changed names). Is there something missing in your post. You may find a personal guarantee in the advertising documents some place.

If I owe you money and don't pay, then hide behind my corp. you get the shaft right? So, for personal protection, I should form the paper corp. first then I’m home free when I shaft you. Fortunately, the law is not designed to allow that inequity. Generally, people get bad advice, especially from attorneys, regarding the purpose and reasons to conduct a business as a corp. vs. another form. Being able to defend yourself is one reason you see right now. Most jurisdictions require all corps. to have legal representation because "most" real corps., not those set up for protection, have several parties in interest.

I would look at the advertising contract, which you may not even have a copy of, and try to work something out with them if you have meet the 3 conditions I have pointed out. If you have not they will probably close the door on you and they have already pointed out your need for counsel. If their Motion is granted they will docket that into a judgment. The judgment will be a real stigma for many years. You really do need to see an attorney because you have a lot to lose otherwise.

 

[justsomeone]

Hello,

I appreciate your advice. I was never hiding behind a corp. I starting up a business and was unsuccessful. The ad was ordered almost a year in advance. Unfortunately things did not go well and I closed my small business account and turned off the phone. I don't deny owing the money and never will but as an individual I hope for immunity from it. The contract was in the name of the llc and the contract does not state any personal liability. I am very financially burdened right now and in no way can afford an attorney. If I get a personal judgment it would be less money to file bankruptcy.

 

[Rexlan]

Do you see the difficulty here. It was your business and it failed. You also agree that you owe the money. Had the business be successful you would have the benefits. If it fails, then it follows that you have the losses.

So, why should you have immunity from the debt ... just because you had a corp.? That is not proper and if it were everyone would become corps. (LLC's, etc.) and no one would be accountable for anything. Surely that does no make sense.

You really need to just look over the contract carefully and see what it says about early termination. You might also call them and ask what the policy is regarding this type situation. I am surprised that you have no way out if the business fails unless it was some other Yellow Pages thing. 10K for that advertising is very expensive too and local phone companies/directories generally are a bit more flexiable.

Again .... you should go see an attorney while you have time so they don't get the default.

 

[justsomeone]

The remaining amount on the contract was $4,000 but it is inflated because of interest and cost etc... One of the benefits of a corp is immunity to debts personally. However I don't blame them for trying to collect. And as I stated I CANT'T AFFORD AN ATTORNEY!

I am still swimming in medical debt from the death of my son. There is no way I can pay this, period! The only solution I can see to the problem is to offer a settlement for monthly payments and a reduced amount in exchange for a personal guarantee. They don't have to accept this and can just go through the courts if they choose or I can file bankruptcy when they come after me.

MICHIGAN LIMITED LIABILITY COMPANY ACT (EXCERPT)
Act 23 of 1993


450.4501 Members; admission; liability for acts, debts, or obligations.

Sec. 501.

(1) A person may be admitted as a member of a limited liability company in 1 or more of the following ways:

(a) In connection with the formation of the limited liability company, by signing the initial operating agreement.

(b) After the formation of the limited liability company, in 1 or more of the following ways:

(i) In the case of a person acquiring a membership interest directly from the limited liability company, by complying with the provisions of an operating agreement prescribing the requirements for admission or, in the absence of provisions prescribing the requirements for admission in an operating agreement, upon the unanimous vote of the members entitled to vote.

(ii) In the case of an assignee of a membership interest, as provided in section 506.

(2) A limited liability company may admit a person as a member who does not make a contribution or incur an obligation to make a contribution to the limited liability company.

(3) Unless otherwise provided by law or in an operating agreement, a person who is a member or manager, or both, of a limited liability company is not liable for the acts, debts, or obligations of the limited liability company.

 

[Rexlan]

One of the benefits of a corp is immunity to debts personally.

And that is my entire point. It is unfortunate that these corps. are formed for that sole purpose. As I said, if we all did that then none would ever have any liability. I think that is also why 99% of them are formed, unles of course you were doing $5M + in sales.

A good plan is to try to settle this as I suggested and to also READ your actual contract and see what it actually says. If there is no contract then this can work to your advantage ... but you will need an attorney.
Good luck and let us know how you come out.

 

[justsomeone]

Well thanks for your reply...I will opt for making a reduced offer plus making monthly payments in exchange for personally guaranteeing the account.

I think that is a win because they are in a better position to collect the money and i won't feel like such a looser for having this bad debt. That is if they accept.

 

[Kevin Donahue]

Rexlan you don't know what the hell your talking about! First of all I had a franchise and had 5 million dollar limits including a 5 million dollar mold policy. The reason why I only had a 5K personal liability is because it was in the customers house, if it was at my shop it would have been a 50K policy. I actually got my questioned answered by a real attorney yesterday, my attorney that set up the corporation and did all the paper work to keep it legal, and I can say without hesitation that you don't know what your talking about, but thanks for your dime store advice! justsomeone do yourself a favor and don't take this man's advice, he thinks everyone that has a corp has a paper corp. I had mine for 10 years and was anything but!