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Category Archives: Bankruptcy

What to do When a Vendor Goes Out of Business

February 16, 2017

R. Shawn McBride recently published an article to the McBride For Business Blog on a topic that might be of interest: What to do When a Vendor Goes Out of Business.

He discusses planning your big event, when you are getting ready to host everybody and you find out one of your vendors went out of business.

You can see the full article here.

This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. Read the rest

Can an LLC Be Precluded from Exercising Its Right to Bankruptcy Relief?

October 11, 2016

To be sure, bankruptcy is not something that new and emerging businesses often think about.  But however unpleasant the thought might be, it may become necessary in the course of running a business to get a fresh start.  In the second quarter of 2016, for example, businesses with 1-4 employees constituted 38.39% of business bankruptcy filings, while businesses with 5-9 employees and business with 10-19 employees constituted 18.29% and 9.69%, respectively.[1]  While big businesses are not immune from the risks of bankruptcy, the numbers seem to suggest that the vast majority of bankruptcy petitions are filed by small businesses, making it all the more necessary for them to plan ahead.… Read the rest

LLC Owners, If You Owe Someone Money, Your Ownership of an LLC Might Not Be Protected: When It Comes to Single-Member LLCs, Charging Order May Not Be the Exclusive Remedy (Part 6)

December 5, 2015

After Olmstead v. FTC, a Florida Case with Potential National Implications.

The Florida Supreme Court’s opinion in Olmstead v. FTC created much uncertainty concerning charging order protection for multi-member LLCs in Florida[1] and seems to have been the catalyst for legislative action in Florida and Delaware, among others.

In 2011, the Florida legislature amended the Florida Revised Limited Liability Company Act to provide that a charging order is the sole and exclusive remedy by which a judgment creditor of a member or member’s transferee may satisfy a judgment from the judgment debtor’s interest in an LLC or rights to distributions from the LLC.… Read the rest

LLC Owners, If You Owe Someone Money, Your Ownership of an LLC Might Not Be Protected: When It Comes to Single-Member LLCs, Charging Order May Not Be the Exclusive Remedy (Part 5)

November 14, 2015

Real Life Stories (Cases) on the Issue: Olmstead v. FTC (Florida).

Olmstead v. FTC, a non-bankruptcy case, dealt with the question as to whether a court may order judgment debtor to surrender all right, title, and interest in the debtor’s single-member LLC to satisfy an outstanding judgment (not unlike the question of whether a debtor-member in bankruptcy transfers all of his or her interests in the LLC to the bankruptcy trustee).[1] In that case, the Federal Trade Commission (“FTC”) sued the defendants for unfair or deceptive trade practices involving an advance-fee credit card scam and obtained judgment for more than $10 million in restitution.… Read the rest

LLC Owners, If You Owe Someone Money, Your Ownership of an LLC Might Not Be Protected: When It Comes to Single-Member LLCs, Charging Order May Not Be the Exclusive Remedy (Part 4)

November 7, 2015

Real Life Stories (Cases) on the Issue: In re Modanlo (Delaware).

In Modanlo, Modanlo was the debtor and held a 100% ownership interest in NYSI, a Delaware single-member LLC.[1] Subsequently, the trustee filed a bankruptcy petition for NYSI and sought the court’s authorization to permit him to act as the manager of NYSI, among other things.[2] Modanlo objected, arguing that neither he nor the trustee as his successor had any authority to cause NYSI to do anything, including placing the LLC into a bankruptcy, once he filed his bankruptcy petition (causing him to cease being a member of NYSI and causing dissolution of NYSI).… Read the rest

LLC Owners, If You Owe Someone Money, Your Ownership of an LLC Might Not Be Protected: When It Comes to Single-Member LLCs, Charging Order May Not Be the Exclusive Remedy (Part 3)

November 3, 2015

Real Life Stories (Cases) on the Issue: In re A-Z Electronics, LLC (Idaho).

A-Z Electronics, another bankruptcy case involving a single-member LLC, follows the reasoning in Albright to reach the conclusion that a debtor-member’s bankruptcy filing assigns his or her entire membership interest, economic and non-economic, to the bankruptcy trustee where there are no other members. In that case, Ryan, along with his wife, filed bankruptcy and listed A-Z Electronics, LLC (the “LLC”) as an asset with a value of “$0.00.”[1] Subsequently, the LLC also filed bankruptcy, signed by Ryan as the sole and managing member of the entity.… Read the rest

LLC Owners, If You Owe Someone Money, Your Ownership of an LLC Might Not Be Protected: When It Comes to Single-Member LLCs, Charging Order May Not Be the Exclusive Remedy (Part 2)

October 29, 2015

Real Life Stories (Cases) on the Issue: In re Albright (Colorado).

In Albright, Albright was the debtor in bankruptcy and the sole member of a Colorado LLC, which owned certain real property.[1]  The bankruptcy trustee contended that, because the debtor was the sole member and manager of the LLC at the time she filed bankruptcy, the trustee now controlled the LLC and could cause the LLC to sell the real property and distribute the net sales proceeds to the bankruptcy estate.… Read the rest

LLC Owners, If You Owe Someone Money, Your Ownership of an LLC Might Not Be Protected: When It Comes to Single-Member LLCs, Charging Order May Not Be the Exclusive Remedy (Part 1)

October 24, 2015

As many of you know, an LLC’s assets are generally not subject to claims by creditors of LLC members for their personal debts. The LLC and its owner are generally considered separate legal entities with their own assets and liabilities. In our previous blog series on LLC statutes (available here), however, we mentioned that creditors of LLC members can get to the assets of the LLC by applying for a charging order, if the state law so provides. A charging order gives the creditor the right to receive distributions from the LLC to which the debtor/member would otherwise be entitled, if any, but does not confer any right to order distributions or participate in the LLC’s management.… Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.