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Law Pro
Law Pro, Attorney
Category: Business Law
Satisfied Customers: 24870
Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
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Can an LLC who is filing Chapter 7 receive payment from another

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Can an LLC who is filing Chapter 7 receive payment from another LLC in the same business (non-emergency medical transportation) in the amount of $40,000 AND 15% of the overall monthly revenue as a "franchise" fee? This business is all over the internet and if you can surf the net, read, and have the initial start-up money ANYONE can do this. They want these monies because they are allowing us to operate under their LLC until we complete the process of getting our limo license. We've already completed filing our assumed name and Articles of Corp. We've only been doing this since February 25, 2013. What can we do? We know we have to pay for the 4 vehicles they are selling us which carries a Kelley Blue Book value of $7,200. for all 4!

Welcome to JustAnswer! My goal is to do my very best to understand your situation and to provide a full and complete excellent answer for you.

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You are sure they are filing Chapter 7? How so?
Customer: replied 4 years ago.


Are you able to give me some advice on my situation?

Basically, the LLC can charge you for the use of their services - you are debtor - not a creditor to whom they are paying.

Until they file chapter 7 bankruptcy, and then even after that, they can collect monies due and owing to them.

In fact, the bankruptcy trustee will pursue their accounts receivable so as to pay off their creditors.

So they can continue to collect the franchise fee as per the contract.


I realize that this answer may not be entirely to your liking, and I regret being the bearer of information that you really don’t want to hear. But it would be unfair to you and unprofessional of me were I to provide you with anything less than truthful and honest information. I hope you understand.


If you have any further questions, please feel free to let me know…

Thank you for using JustAnswer.


Why did you rate the service as poor? What didn't you understand in my answer or what can I explain more clearly to you?
Customer: replied 4 years ago.


I understood what you said. We don't have a signed contract but I do have a copy of what they want us to agree to. We will be using their name temporarily which we are willing to give them something for, but by the end of this month we will have our own license and can make our own contracts as they did. So why would we have to pay them a franchise fee, especially on a continuous basis?

So you already don't have an executed (signed) franchise agreement with them?

How would you operate legally if you didn't operate under their LLC? Any options with other companies?
Customer: replied 4 years ago.

What they did, they added us to their limousine license, Happy Rides LLC doing business as Trans-Assist LLC. They contracted with 3 of the brokerage companies that set up transportation for people covered by Medicaid. We are operating under their name until we can obtain our own contract with some of these brokerage companies. We, Happy Rides LLC, are doing all the work, but because Trans-Assist LLC has the contract with the brokerage companies, the revenue earned all goes into their bank account and they in turn give it to us. What they want us to do is pay them $40,000.00 with a $16,000 balloon note in a year plus 15% to 20% per month of our overall monthly revenue until....

Regretfully, if you can't find another company under who's license you can operate under - then you have no choice but to pay them OR cease operating your business until you get your license.

I realize it seems like extortion what they are asking. But if you can't find another company then you either have to pay as per their terms OR cease operations till you get your own license.

I realize that this answer may not be entirely to your liking, and I regret being the bearer of information that you really don’t want to hear. But it would be unfair to you and unprofessional of me were I to provide you with anything less than truthful and honest information. I hope you understand.


Your positive rating of my service benefits my ability to continue to assist you and others like you. Thank you.

Please remember to rate my service. If you need further help, just reply to me via the “REPLY” button and I will be happy to continue.


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