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BizIPEsq., Attorney
Category: Business Law
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If I open a business and form an LLC can the earnings be attached

Customer Question

If I open a business and form an LLC can the earnings be attached in the judgment?

The judgment was just awarded. I have only social security. I can't live on just that.

Can the money in an LLC be attached if I am the only member?
Submitted: 1 year ago.
Category: Business Law
Expert:  BizIPEsq. replied 1 year ago.

TheLegalistEsq :

Hello I will be assisting you.

TheLegalistEsq :

If the judgment is against you only then any money you earn could be used as a source of fund to pay off the judgment this also includes any distributions the LLC would make to its members (i.e. to you)

TheLegalistEsq :

if your question is whether the plaintiff can go after assets of the LLC, then the answer is not necessarily. First the plaintiff would have to "pierce the corporate veil". This means that the plaintiff would have to penetrate the limited liability shield of the LLC. The plaintiff could prevail in piercing the corporate shield if you co-mingled money of the LLC with your personal funds (for example, if you used one bank account for the LLC and for your personal funds, if you accepted payments on behalf of the LLC through your personal account, if you used LLC money for personal expenses) or if the LLC was not properly capitalized (i.e. there is not enough money in the LLCs account to meet its operational responsibilities and whereby you in effect pay off the bills of the LLC)

TheLegalistEsq :

Correction of typos in first sentence: If the judgment is against you (i.e. the LLC was not a named party in the law suit) then only your personal assets or money you earn could be used to satisfy the judgment. This would also include any distributions the LLC makes to you as its member

TheLegalistEsq :

Finally, another way to pierce the corporate veil is if the LLC was setup as a sham without any merit to it in order to defraud creditors.

TheLegalistEsq :

I need to log off. Let me know if I answered your question.

Customer :

Assuming there is no commingling of funds,Is there a difference between earnings and distribution?

Customer :

The LLC would certainly not be sham. I am working on a legal business that will take time to create "assets". In the interim, I will need to earn some income as I cant' meet my basic need from just social security.

TheLegalistEsq :

Earnings of the LLC are its earnings until they are distributed to the members as profits. Since judgment has been entered against you I recommend one of two actions:

TheLegalistEsq :

1) petition the court for a payment plan allowing you top retain a living wage

TheLegalistEsq :

2) consider filing for bankruptcy and thus potentially discharging the judgment. You should consult a bankruptcy attorney. If you cannot afford one the various bar associations in California may be able to help with pro-bono representation.

TheLegalistEsq :

continuation to #1: ...and noting to the court that you subside on social security

TheLegalistEsq :

Please rate my answers positively. Renewed good luck!

TheLegalistEsq :

A reminder to kindly look at the answer and rate it. Without your positive rating I cannot get paid. It was a pleasure assisting you!

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