How to Collect a Judgment in Michigan if an LLC Is out of Business?

By Terry Masters

A limited liability company is a business entity that protects its owners, known as members, against personal liability for business debts. Under Michigan's Limited Liability Company Act, an LLC that closes down its business can establish a date past which creditors are barred from pursuing claims against the company or any assets that may have been distributed to members. Collecting a judgment against a dissolved LLC in Michigan depends upon whether the LLC followed the dissolution rules, whether the judgement was obtained before or after the date of dissolution and whether the judgment creditor informed the LLC of the claim in a timely fashion.

Step 1

Establish the LLC's date of dissolution. Go to the business entity search section of the website for the Michigan Department of Licensing and Regulatory Affairs. Search for the name of the LLC. The LLC's state record will include every official state filing and the status of the company. Determine if the LLC filed a certificate of dissolution or if a date of dissolution is listed on the summary record. Take note of the dissolution date, if it exists. If the LLC has not filed a certificate of dissolution with the state but has gone out of business, the law considers it to have been wrongfully dissolved.

Step 2

Determine whether your judgment was entered before or after the date of dissolution. If you have a judgment that was entered before the date of dissolution and you had previously notified the LLC of the judgment's existence, you are classified under the law as a known creditor. Contact the managing LLC member who is listed on the company's certificate of dissolution. Obtain the instructions for filing a claim on the company's assets. The law requires the LLC to notify known creditors of its dissolution and give those creditors at least six months from the date of dissolution to provide written information on an existing claim. If you are still within the six-month time period, send the LLC written notice as required.

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Step 3

Send the LLC notice of your judgment if the judgment was entered after the date of dissolution or if the judgment was entered before the date of dissolution but you were never informed by the company that it was dissolving, provided it is still within one year of the date of dissolution. The law requires dissolving LLCs to publish a notice of dissolution in a newspaper of general circulation and give creditors who were unknown or had no notice of dissolution one year to make a claim on the LLC's assets. If you were informed of the LLC's intent to dissolve and never presented your judgment to the members, or if it is more than one year from the date the LLC's certificate of dissolution was filed, your judgment is barred and you cannot collect.

Step 4

File a wrongful dissolution suit against the LLC in state civil court if the LLC dissolved without filing a certificate of dissolution or if it had notice of your judgment and never responded to your request for payment under the dissolution procedures. Name the LLC and all members personally. A dissolving LLC in Michigan is required to pay off all creditors first, before distributing any assets to members. If the LLC wrongfully dissolved or distributed assets to members instead of known creditors, you can sue the LLC and the members personally to the extent of the distributed assets. In other words, if you were owned $100 and the LLC distributed $100 to a member instead of paying you, you can sue the member for that $100. If you are owed $200, you can only collect the $100 that was wrongfully distributed and cannot pursue the member's personal assets. If the LLC had no assets or exhausted them by paying other creditors, there will be nothing for you to collect and your judgment is worthless.

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Can a Creditor Collect if an LLC Is Dissolved?



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