Legal Question in Business Law in California

Re: LLC-Business Law

It looks to me as though this question is a follow-up to two others I've already answered about the same set of facts. Maybe it is time for you to hire a lawyer. In any case, here are some more answers:

1. An LLC that is "officially out of business" can be sued. See Corporations Code section 17354. The decision to defend or default when sued should be made based upon other criteria such as potential liability and available defenses. If the suit is for breaching a commercial lease that has 1-1/2 years left to run, the exposure is fairly high, and the main defense may relate to mitigation of damages through efforts to find a new tenant. Without reviewing all the facts personally, I couldn't hazard a guess as to whether the suit should be defended or not.

2. If the defendant(s) don't answer the complaint, the plaintiff will be entitled to a default judgment for up to the maximum amount sought by the complaint.

3. Maybe.

4. For any of the reasons set forth in my previous answers, which include possible successful application of the "alter ego" theory to the facts of the case, or to a failure to pay or provide for business debts such as the lease before transferring the LLC assets to the insiders.

5. LLC veil-piercing can be used by a court to find the owner (or former owner) of an LLC personally liable for the LLC's debts when the LLC owner has not managed the LLC as though it is separate and distinct from himself. The most common form of mismanagement leading to a court applying the alter ego rule is the commingling of LLC and personal money or other property, but there are others, such as the failure to keep financial records for the LLC.

Finally, on a technical note, unless you were also named as a defendant in the complaint, you are probably immune from alter ego liability, even if you are added through identification, post-trial or post-default, as a "Doe" defendant, since there are court rulings that a judgment based on alter ego cannot be enforced against a party that didn't have an opportunity to defend. The plaintiff would have to forego its default judgment and bring you to trial. However, if you are named in the complaint or added to it before trial, no such immunity results.