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Can a corporation set up numerous LLCs to commit credit fraud

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Can a corporation set up...
Can a corporation set up numerous LLC's to commit credit "fraud"? Here is a ficticious example: Mr. X owns a very large automotive repair shop named X, Inc. For the purpose of mitigating risk, he creates a separate LLC for each of the repair specialties at his shop. Muffler LLC; Brakes LLC; Tune Up LLC. Mr. X opens a unsecured charge account at a local auto parts store. He has a separate account for each LLC. He orders $10k in parts under each LLC, charging all to the open accounts. After 6 months, Mr. X decides Muffler LLC should file Chapter 7 due to poor sales. In this case, does the auto parts store have recourse against the parent company or the other two LLC's?
Submitted: 9 years ago.Category: Business Law
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1/1/2009
Business Lawyer: Ellen, Attorney replied 9 years ago
Ellen
Ellen, Attorney
Category: Business Law
Satisfied Customers: 36,715
Experience: 25 years of experience helping people like you.
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Hello,


Thank you for your question. I am happy to assist you.


Based only on the facts presented in your hypothetical, the auto parts store would not have recourse against the parent company or other LLCs. This would not be credit fraud but rather would be considered asset protection planning.


I hope that the information which I provided was helpful to you.


Best wishes for a Happy New Year. If you have additional questions, please do not hesitate to submit them to me directly.


Thank you,
FLAandNYLAWYER


Please click ACCEPT so that I can get credit for my work

Bonus and Positive Feedback gratefully accepted!


THIS IS FOR INFORMATION ONLY. NO ATTORNEY-CLIENT RELATIONSHIP EXISTS. PLEASE CONSULT A LAWYER IN YOUR STATE FOR LEGAL ADVICE

Ellen
Ellen, Attorney
Category: Business Law
Satisfied Customers: 36,715
Experience: 25 years of experience helping people like you.
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