Legal

Ask a Lawyer and Get Answers to Your Legal Questions

Ask a Lawyer,
Get an Answer ASAP!

Legal
This answer was rated:

I am one of 3 members in a Delaware LLC, which was properly

formed and has not been...
i am one of 3 members in a Delaware LLC, which was properly formed and has not been run improperly (meaning no personal assets are intermingled, it has its own bank account used only for the LLC's expenses, etc.). about $150,000 of our capital has been invested in the LLC. The purpose of the business of the LLC is to generate ongoing income for the members, and we intend to distribute virtually all income monthly (assuming that is possible). we have not started generating any income as of yet though.
It has recently come to our attention that there are legal trolls pursuing class action lawsuits against businesses like ours. While we haven't been sued or even approached, the question is, "would income that we've already distributed to members be safe from liability"? in other words, are the current assets of the LLC the only assets that potential plaintiffs can go after?" Given that we plan to distribute income regularly (and spend it), we want to make sure that income is not subject to liability, or if it is, under what circumstances. Thanks.
Show More
Show Less
Ask Your Own Legal Question
Answered in 5 minutes by:
7/9/2017
Ray
Ray, Lawyer
Category: Legal
Satisfied Customers: 44,502
Experience: 30 years in civil, probate, real estate, elder law
Verified

Hi and welcome to JA. Ray here to help you today.Please bear with me a few moments while I review your question and respond.

Ask Your Own Legal Question

Thats correct that only the assets here of the LLC can be sought if there was any judgment against the LLC. Any distribution have left the LLC and are not vulnerable to such a suit down the road.Making the distributions regularly when you get to that point is a good idea, it actually makes the LLC less a target in my mind by keeping the LLC account down lower here.

You have the right idea to lower potential liability by lowering the assets in the name of the LLC in this situation.

I appreciate the chance to help you today.Thanks again.

If you can positive rate 5 stars it is much appreciated.

Ray
Ray, Lawyer
Category: Legal
Satisfied Customers: 44,502
Experience: 30 years in civil, probate, real estate, elder law
Verified
Ray and 87 other Legal Specialists are ready to help you
Ask your own question now
Customer reply replied 6 months ago
Hi Ray, thanks for the answer. The only thing that doesn't make sense to me is that if that is true, it seems like an incentive for people to do things that they know are potentially an issue (such as violating the CAN SPAM act and spamming users' emails, for example), generate a bunch of income from doing so into an LLC, and distributing that income out so that it's "protected". What am I missing here? Thanks

It is real hard to sue and collect agsint an LLC, usually they close down the LLC and start a new one.By keeping assets in the bank low real easy to trnasfer funds and leave a shell LLC with say $5 balance and start a new LLC elsewhere with new account.

Ask Your Own Legal Question
Customer reply replied 6 months ago
Hi Ray - that doesn't quite answer my follow up question. Let me slightly alter/rephrase it. What's to stop someone from making $100MM in income (using an LLC structure) by violating a law, pulling that income out as it comes in, and generally leaving only $5 in the LLC account at any given time as you say? Is the only recourse for plaintiffs to sue the LLC which has $5 in assets? I mean, I guess they can sue for future income, but what about the $100MM already pulled out? Seems like there must be ways for them to go after the members of the LLC, since they took that ill-begotten income and enjoyed its benefits. Is there not?

They could try for personal liability here but it is unlikely to be successful.Thats why LLCs are so popular.They are in many ways a house of cards and can be folded if necessary.I do a lot of nursing homes ,they are totally paper companies, they rent the home from landlord, if the state comes after them or somebody sues for millions they loot the account and let it go.It folds up here and they set up again as a new legal entity.It may not seem fair but it it is legal.Its a lot like Chapter11 business bankruptcy, Mr. Trump here has done it multiple times and never missed a beat.It is also why corporate lawyers make so much.

Thanks again.

Ask Your Own Legal Question
Customer reply replied 6 months ago
sorry to keep asking follow-ups here, but you said that "they could try for personal liability here but it is unlikely to be successful". why is that? what needs to happen to "pierce the LLC veil"?

They would have to show fraud here, rathe than a normal distribution of funds.If the LLC held millions an dsitributed in a day and then folded it maybe fraud and piercing the veil.

Ask Your Own Legal Question

he corporate veil is not unique to Delaware. The corporate veil is a legal concept “that separates the personality of a corporation from the personalities of its shareholders, and protects them from being held personally liable for the company's debts and other obligations.”

The corporate veil is essentially the concept that maintains corporate law throughout the world. Without the ability to act as its own entity, how else could companies transact business? The idea of a corporation or LLC acting as a separate entity and limiting the liability of the shareholders is what allows the business world to function.

The importance of the corporate veil in Delaware cannot be understated. Delaware possesses stacks of legal doctrine stipulating the separation of a corporation from its shareholders. This distance between investors and the corporations in which they have invested is what permits investors—aka shareholders—to feel comfortable in investing.

Delaware courts have been very reluctant to allow the piercing of the corporate veil. If a corporation is sued, its shareholders typically will not be held liable.

Piercing the corporate veil is defined as a situation in which a court decision puts aside limited liability and hold a corporation's shareholders or Board of Directors personally liable for the corporation's actions or debts.

Any Delaware corporation that is qualified to do business in another jurisdiction (through Foreign Qualification) can fall back on Delaware law structure; that is, a Delaware company can rely on the world-famous case law of the Delaware Court of Chancery in the case of any litigation.

Ask Your Own Legal Question
Customer reply replied 6 months ago
is showing fraud the *only* way they can successfully go after personal assets?

Pretty much Delaware has cases where they have refused here, thats why they are so popular for LLCs

In 2014, Cornell Glasgow, LLC vs Nichols demonstrated the Delaware Court of Chancery’s position where the Court recognized that closely held entities, such as the defendant's Delaware LLC, are under the complete control of their owners, and emphasized "that's why people form closely held entities, to cabin their exposure under contracts."

If contracting parties do not avail themselves of the frequently-used contractual protections — personal guarantees, security agreements and the escrowing of assets — then they cannot expect the Court of Chancery to hold owners personally liable by seeking to pierce the corporate veil.

The concept of the corporate veil is quite significant in any jurisdiction, but since Delaware remains the destination for start-up corporations and LLCs in the United States due to the Court of Chancery’s extensive case law on the subject.

Ask Your Own Legal Question
Customer reply replied 6 months ago
ok thanks!

Bye for now have a great Sunday.

Ask Your Own Legal Question
Ask Ray Your Own Question
Ray
Ray
Ray, Lawyer
Category: Legal
Satisfied Customers: 44,502
44,502 Satisfied Customers
Experience: 30 years in civil, probate, real estate, elder law

Ray is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises!

Gary B.Edmond, OK

My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer.

EricRedwood City, CA

I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight.

MichaelWichita, KS

PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent.

Three H.Houston, TX

Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!!

ElaineAtlanta, GA

It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem.

TonyApopka, FL

Not only did he answer my Michigan divorce question but was also able to help me out with it, too. I have since won my legal case on this matter and thank you so much for it.

LeeMichigan

< Previous | Next >

Meet the Experts:

Tina

Tina

Lawyer

8,775 satisfied customers

JD, BBA Over 25 years legal and business experience.

Ely

Ely

Counselor at Law

24,353 satisfied customers

Private practice with focus on family, criminal, PI, consumer protection, and business consultation.

INFOLAWYER

INFOLAWYER

Attorney

20,727 satisfied customers

Licensed attorney helping individuals and businesses

JPEsq

JPEsq

Attorney

2,132 satisfied customers

Experience as general attorney, in house counsel, SSDI, Family Law attorney, and law professor

Law Educator, Esq.

Law Educator, Esq.

Attorney

42,358 satisfied customers

JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law

Ellen

Ellen

Lawyer, Consultant

8,238 satisfied customers

25 years of experience helping people like you.

Guillermo J. Senmartin, Esq.

Guillermo J. Senmartin, Esq.

Attorney

292 satisfied customers

7+ years of experience handling various legal matters.

< Previous | Next >

Related Legal Questions
Can a class-action lawsuit be filed against an attorney?
Can a class-action lawsuit be filed against an attorney? … read more
LegalGems
LegalGems
Juris Doctorate
10,698 satisfied customers
I'm thinking of joining a class action lawsuit, but I have a
Hi,I'm thinking of joining a class action lawsuit , but I have a question for you that I have not been able to get a answer to yet,so hopefully you can help me.the question is,how can I find out if th… read more
INFOLAWYER
INFOLAWYER
Attorney
Doctoral Degree
20,727 satisfied customers
Is there a tort class action? 1) deceit, such as claims of
Is there a tort class action? 1) deceit, such as claims of records not being received even after proof of the receipt is furnished. 2) intentional discarding or hiding evidence (records) 3) failing to… read more
Dwayne B.
Dwayne B.
Juris Doctor
28,689 satisfied customers
How do I file a class action lawsuit against the MGMT Co. of
how do I file a class action lawsuit against the MGMT Co. of our Apt Comp[lex … read more
Dwayne B.
Dwayne B.
Juris Doctor
28,689 satisfied customers
How can I find out if there are class action lawsuits on the
How can I find out if there are class action lawsuits on the medication Prednisone ? … read more
Dwayne B.
Dwayne B.
Juris Doctor
28,689 satisfied customers
I have got a bunch of class action suits post cards and
Hello, I have got a bunch of class action suits post cards and outcomes of the decisions, wherein I have been offered money a part of the suit. I would like to know if I accept it, will I have any obl… read more
LegalPro54
LegalPro54
Doctoral Degree
1,258 satisfied customers
I am looking for a class action attorney in west palm beach
i am looking for a class action attorney in west palm beach florida … read more
LawGuy
LawGuy
Juris Doctor
123 satisfied customers
I want to know how to start a class-action lawsuit. Their
I want to know how to start a class-action lawsuit … read more
INFOLAWYER
INFOLAWYER
Attorney
Doctoral Degree
20,727 satisfied customers
I am looking for an attorney that has a class action law
I am looking for an attorney that has a class action law suit against prilacet and nexem … read more
Law Educator, Esq.
Law Educator, Esq.
Attorney
Doctoral Degree
42,358 satisfied customers
I am debating on filing a class action lawsuit against my
I am debating on filing a class action lawsuit against my apartment complex due to the way they have mistreated my living situation over the past months. I was considering getting a lawyer but wanted … read more
Law Educator, Esq.
Law Educator, Esq.
Attorney
Doctoral Degree
42,358 satisfied customers
Is there a class action against predosone actors. Alaska.
just tring to gather information im not sure what to do… read more
LegalGems
LegalGems
Juris Doctorate
10,698 satisfied customers
If a class action lawsuit was settled in Italy can the
If a class action lawsuit was settled in Italy can the lawyer in Italy demand payment from an american citizen living in the US that was included and received money under that lawsuit after five years… read more
LawGuy
LawGuy
Juris Doctor
123 satisfied customers
Depro-Provera class action lawsuit. My daughter was given a
Depro-Provera class action lawsuit. My daughter was given a shot for birth control when she was 16 which messed up her body. How can she collect for damages?… read more
LegalGems
LegalGems
Juris Doctorate
10,698 satisfied customers
Can the lead plaintiff in a class action suit designate who
can the lead plaintiff in a class action suit designate who is going to be the class action management team? … read more
Law Educator, Esq.
Law Educator, Esq.
Attorney
Doctoral Degree
42,358 satisfied customers
I am almost 70. Is this JND Class Action Administration to
I am almost 70. Is this JND Class Action Administration to credit bureaus legitimate? If you answer this by email or something let me know. Thank you for any and all help. I stay by this computer mach… read more
N Cal Atty
N Cal Atty
Doctoral Degree
59 satisfied customers
Is there a class action lawsuit for clonazapam? Prescribed
Prescribed while in Hawaii, was hospitalized and now living in texas … read more
Legal Eagle
Legal Eagle
Attorney
Doctoral Degree
7,340 satisfied customers
There was a class action suit against my employer. I
There was a class action suit against my employer. I recieved anotice stating that i can receive money. I was part of the griup suing, im just an employee. But i could use the money. Any Negative repe… read more
KLAW
KLAW
Juris Doctorate
1,759 satisfied customers
Is there a class action lawsuit against the makers of
is there a class action lawsuit against the makers of interfeon injections … read more
Legal Eagle
Legal Eagle
Attorney
Doctoral Degree
7,340 satisfied customers

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

Show MoreShow Less

Ask Your Question

x