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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 89693
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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I am involved in a major lawsuit against a hotel in New York

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I am involved in a major lawsuit against a hotel in New York City. In doing research, I have just discovered that the corporation which runs the hotel was dissolved by NYS Department of State, Division of Corporations, in 1998. Incredibly, the business was operated these past 15 years by a corporation that was not legally in business.

In March 2013, in an apparent move to cover over this illegality, in light of the litigation, they incorporated a new entity to run the hotel. At that point, for example, the payroll checks stopped using the name of the defunct corporation, and started using the newly created name. But for those 15 years, all business was conducted through the dissolved corporation.

What can the consequences be for this fraud? Who can I complain to, and what might the penalties be?
Submitted: 1 year ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking.

First, you can file a complaint with the NY Secretary of State since they control business entities. But NY law allows for unincorporated business entities to operate, so there is no criminal penalty for fraud, but there could be tax implications on the owners since they were paying tax as a corporate entity that did not exist when an unincorporated entity owners have to pay personal taxes. So you can also file a complaint with the NY Department of Revenue and Taxation as well.

Second, the penalty is that because this was an unincorporated business entity, you can seek to now pierce any alleged corporate veil that existed if they were a legally registered corporate entity and this means you can seek to go after the owners personally since they are not entitled to any corporate protection because their corporate entity was defunct and not registered.



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Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 89693
Experience: All corporate law, including non-profits and charitable fraternal organizations.
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