I have personal judgments against me. Should I be concerned about opening an LLC in my name?

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I have personal judgments against me. Should I be concerned about opening an LLC in my name?

Asked on June 16, 2009 under Business Law, California

Answers:

J.M.A., Member in Good Standing of the Connecticut Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

I am a lawyer in CT and practice in this area.  A LL is a separate legal entity.  Therefore, while you have a judgment against you, that does not mean that the LLC is at risk.  However, the judgment debtor may execute on whatever interest you have in an LLC, so be cautious.  To the extent that the creditor does not know about this company, you are safe.  If the creditor finds out, it can make certain applications to the court to try to get a part of your interest or at least order payments that would normally go to you from the LLC to go to the creditor.  If you want the LLC to obtain a loan, you may have to guarantee the loan.  If there is a judgment out there on you, the lender may not lend the money without another guarantor.  these are some issues you will face. 

B. B., Member, New Jersey Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

If you're going to be the sole owner of the LLC, it doesn't really make a difference.  Whatever money or other assets you put into the LLC, and whatever profit the business makes, the LLC only changes your form of ownership, not the fact of ownership, and your creditors can probably reach the same assets, either way.

However, if you're going to share ownership of the LLC with others, you might want to talk to an attorney first, because (depending on all of the facts, and the law of your state,) it's possible that if you don't tell the other owners about your judgments, it would be grounds for them to sue you later for fraud.  One place to find a lawyer in your area is our website, http://attorneypages.com


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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