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.