Collecting Against LLCs, Dissolved Companies, and Shell Entities
Reaching Assets when Businesses Close, Reorganize, or Operate Behind Corporate Layers
Some judgment debtors believe they can avoid paying a judgment simply by dissolving an LLC, abandoning a corporation, or shifting operations into a new entity with a different name. In practice, dissolution or restructuring does not eliminate liability. New York law provides multiple avenues to pursue assets from defunct, reorganized, or shell companies that continue operating in substance even after their formal structure has changed.
I approach these matters with a focus on substance over form: understanding how the business functioned, where its assets went, and whether the restructuring reflects legitimate commercial activity or a strategy to evade payment.
Understanding Dissolved and Inactive Entities
A dissolved company is not shielded from judgment enforcement. Its assets do not disappear; they remain reachable to satisfy existing liabilities. Members or owners cannot simply wind down a business, distribute the assets, and walk away from lawful debts. Post-dissolution transfers, distributions, and asset movements may all be subject to recovery if they impair a creditor’s rights. Common issues include:
- transferring remaining assets to members without paying creditors,
- distributing business income after dissolution,
- continuing to operate informally despite filing dissolution documents,
- failing to preserve records or account for assets.
LLCs and the Limits of Liability Protection
LLCs provide limited liability in legitimate circumstances, but they do not protect members from liability when the company:
- is used to perpetrate fraud or evade obligations,
- is inadequately funded from the beginning,
- commingles personal and business assets,
- operates without meaningful corporate separation,
- transfers assets to insiders after litigation begins.
Shell Entities and Asset Holding Companies
Some debtors use multiple LLCs or holding companies to own assets, generate income, or move funds. These structures may appear separate on paper while functioning as components of a single business enterprise. When a shell entity exists solely to receive payments, hold property, or obscure ownership, its separateness may be challenged.
Indicators that a company functions as a shell often include:
- no meaningful operations,
- no employees or independent revenue streams,
- funding sourced entirely from related parties,
- assets transferred into the entity immediately before or after litigation,
- shared management or commingled financial accounts.
Successor Companies and The “Same Business Under a New Name” Problem
Debtors sometimes close one company and reopen under another name, with the same location, customers, employees, ownership, or equipment. This restructuring is often designed to distance the new entity from the prior company’s debts. Under New York law, successor liability may apply when the new entity is, in substance, a continuation of the prior business.
Courts look at continuity of operations, not corporate paperwork. If the new company is effectively the same business with a different label, enforcement may proceed against it.
Identifying Assets When the Entity Has “Disappeared”
Even when a company has no visible operations, assets may remain reachable. Through a combination of restraining notices, subpoenas, bank record tracing, and turnover proceedings, it is often possible to identify:
- undistributed revenue or receivables,
- assets transferred to owners or related companies,
- business equipment or property,
- funds deposited into related entities,
- concealed or redirected income streams.
How These Claims Interact with Other Enforcement Tools
Claims involving LLCs, dissolved companies, and shell entities frequently involve:
- fraudulent-transfer litigation under the Debtor and Creditor Law,
- turnover proceedings to recover assets held by transferees,
- veil-piercing and alter-ego theories,
- successor-liability claims,
- subpoenas directed at members, officers, or related businesses,
- depositions to identify who controls business decisions and finances.
A Focused, Evidence-Driven Enforcement Strategy
Because these cases often involve incomplete records, informal business practices, or rapid entity changes, careful analysis is essential. I examine documents, bank records, public filings, corporate histories, and transfers to determine where the debtor’s assets are and how best to reach them. The objective is to follow the economic reality, not the paperwork.
Dissolved LLCs and Shell Companies Frequently Asked Questions
Does dissolving an LLC wipe out a judgment in New York?
No. Dissolution does not erase existing debts. A dissolved company’s assets remain available to satisfy creditors, and members cannot simply distribute those assets to themselves and walk away. Transfers or distributions that impair creditors’ rights can often be challenged and unwound.
Can I still enforce a judgment if the company is inactive or has no current operations?
Yes. Even when a business has stopped operating, it may have remaining assets, receivables, or prior transfers that can be reached. Enforcement often focuses on tracing where the company’s value went rather than relying on present-day activity.
What if the debtor moved business operations into a new company?
When a new entity continues the same business with the same owners, employees, customers, or equipment, successor-liability or alter-ego theories may apply. New York courts look at continuity of operations, not just corporate labels or logos.
Do LLCs always protect their members from personal liability?
No. LLCs provide limited liability only when used properly. That protection can be overcome if the entity is used to perpetrate fraud, avoid obligations, commingle funds, or transfer assets to insiders once liability arises.
What is a “shell company” in the context of judgment enforcement?
A shell company is an entity that exists primarily to hold assets, receive payments, or obscure ownership without meaningful independent operations. When a company has no employees, no real revenue of its own, and is controlled entirely by related parties, it may be treated as part of a broader business structure.
Can I pursue assets that were transferred out of a dissolved or inactive company?
Often, yes. Transfers of income, equipment, accounts, or property to members or related entities can be examined under fraudulent-transfer law, turnover proceedings, and veil-piercing or successor-liability theories. The focus is on timing, beneficiaries, and whether creditors were left unpaid.
How do you identify assets when the company appears to have “disappeared”?
Asset tracing combines restraining notices, subpoenas, bank records, corporate filings, and depositions to reconstruct the company’s financial history. This work can uncover undistributed revenue, transfers to insiders, related-entity accounts, and other locations where the company’s value now resides.
What types of legal tools are used in cases involving dissolved companies and shell entities?
These cases often involve a combination of fraudulent-transfer litigation, turnover proceedings, veil-piercing and alter-ego arguments, successor-liability claims, and targeted subpoenas to owners, officers, and related businesses. The objective is to follow economic reality across entities and reach assets that should satisfy the judgment.