Ask Me Help Desk

Ask Me Help Desk (https://www.askmehelpdesk.com/forum.php)
-   Corporate Law (https://www.askmehelpdesk.com/forumdisplay.php?f=58)
-   -   Garnishment of Bank Account (https://www.askmehelpdesk.com/showthread.php?t=41999)

  • Nov 10, 2006, 11:47 AM
    Andre2006
    Garnishment of Bank Account
    Can a collection agency in New York State garnish or place a hold/freeze on a Limited Liability Corporation account if the name of the person they are after appears on the account as well?

    In other words, if 'John Doe' has defaulted on a huge loan and 'John Doe' owns 'Doogy Shampoo LLC', can the lawyers persueing payment from 'John' freeze the LLC account that his name is attached to? Or is the LLC account protected?
  • Nov 10, 2006, 11:56 AM
    mr.yet
    No, if the garnishment is for an individual they cannot, attach the LLC
  • Nov 10, 2006, 11:59 AM
    Andre2006
    Oh, God! I hope you're right! :-)
    THANKS!
  • Nov 10, 2006, 12:05 PM
    ScottGem
    I'm not sure I agree. It think it depends on how John Doe is listed on the account. If he is listed only as an authorized signator, meaning they can authorize withdrawals, then probably not. However, if he is listed as a Joint Tenant, they probably can.
  • Nov 10, 2006, 12:12 PM
    mr.yet
    Limited Liability: Owners of a LLC have the liability protection of a corporation. A LLC exists as a separate entity much like a corporation. Members cannot be held personally liable for debts unless they have signed a personal guarantee.
  • Nov 10, 2006, 12:17 PM
    ScottGem
    Quote:

    Originally Posted by mr.yet
    Limited Liability: Owners of a LLC have the liability protection of a corporation. A LLC exists as a separate entity much like a corporation. Members cannot be held personally liable for debts unless they have signed a personal guarantee.

    Yes that is true. But I gather that's not the case here. It would appear the debt is a personal one and the OP is concerned about corporate assets being attached. So the issue is how the account was setup. While it would be unusual and definitely not smart for an individual to sign up as a joint tenant on a corporate account, it could be done and it could make the account attachable.
  • Nov 10, 2006, 12:18 PM
    Andre2006
    I was the one who opened the account for this LLC and I'm worried that because my name appears as the one who opened it (and whose name appears on the next line after the store's name on the credit card) that I might have shot myself in the foot.:-(
  • Nov 10, 2006, 12:23 PM
    ScottGem
    You have to determine how you are listed. If the LLC is the account holder and you are just listed as an authorized rep, the funds should be safe.
  • Nov 10, 2006, 12:30 PM
    mr.yet
    It appear ScottGem is correct for in NEW YORK.

    Placing assets within a business entity (i.e. limited liability company (LLC), corporation or partnership) is sometimes touted as an asset protection device, with respect to personal debts. While this strategy has considerable merit, it is misleading because, when used by itself, it dangerously and unnecessarily exposes these assets to a high risk of loss to the business's creditors.

    In order to understand how protection of your business from personal debts is possible, you need to understand something called a "charging order," and how it affects limited partnerships (LPs), general partnerships, limited liability partnerships (LLPs), sole proprietorships, corporations and limited liability companies.

    The charging order concept stems from a theory involving partnership property. For example, a partner in a general or limited partnership incurs a large personal debt from activities outside the partnership. Further, this debt cannot be satisfied from the partner's personal assets outside the partnership.

    According to this view, the personal creditor of the partner can obtain what is termed a "charging order" against the partner's interest in the partnership, and become an "assignee" of this interest. In effect, the creditor attaches the partner's interest in the partnership.

    However, according to the law, a partner does not actually own any specific assets in a partnership. His property interest is, in fact, his partnership interest itself, which is deemed a type of personal property. Because of this theory regarding partnership property, a personal creditor of a partner may attach the partner's interest, but the creditor may not directly attach the underlying partnership assets.
  • Nov 10, 2006, 12:42 PM
    Andre2006
    I just checked and I am listed as a signator. Hopefully everything will be OK. I was concerned because I was the one that opened the account.

    Thank you,:) both so much!
  • Nov 10, 2006, 12:43 PM
    ScottGem
    Actually that isn't what I was thinking. My point was in reference to how the account owners were listed. If ownership of the account is solely under the corporation, then the assets are safe from any personal debts. But if ownership is in the corporate name with an individual as a joint tenant, then there might be some risk.

    The other point is that it would be unusual and unlikely to create a corporate account in joint tenancy with an individual. But its possible whether by intent or mistake.
  • Nov 10, 2006, 12:44 PM
    excon
    Hello Andre:

    Let's back up a little bit and get our terminology straight.

    I'll assume that YOU are the one, as an individual, who owes the money. Did they sue? If they did, and you lost, and they have a judgment - that's one thing. If they didn't sue, and it's just a collection agency trying to collect - that's another thing. How are they trying to collect? How do you know about their efforts?

    Whether they can legally collect the debt from the corporate account is a different issue from whether they're going to TRY to collect the money from the corporate account. Collection agents aren't nice guys. However, I suspect that if they could have, they would have. They wouldn't have simply threatened.

    If they haven't sued you yet, defend yourself.

    If you are simply a signer on the corporate account, and the corporate veil cannot be pierced due to fraud (and I don't know what went on), it's my view that the corporation money cannot be attached.

    Finally, if you're a salaried employee of the corporation, and they have a judgment, your wages can be garnished.

    excon
  • Nov 10, 2006, 12:44 PM
    ScottGem
    Quote:

    Originally Posted by Andre2006
    I just checked and I am listed as a signator. Hopefully everything will be OK. I was concerned because I was the one that opened the account.

    Thank you,:) both so much!

    In that case, the funds should be safe. The corporation owns those assets, and you are only an authorized signator.
  • Nov 10, 2006, 12:50 PM
    Andre2006
    It is a hospital debt (was in hospital for 32 days, and NO insurance). They have a judgement against me and I'm assuming they are going to try for my account. I have a personal account and I also have the mentioned LLC account. I just started this business last year. I quit my job to pursue it. I have yet to pay myself for anything yet. No income. My brother is currently living with me and paying the bills and buying food. I have no income so I would assume they will try to grab my personal account first (which has $36 in it) and then move to grab the LLC account because there is no money in the personal; account.

    I wish I could type/spell better! Lol

  • All times are GMT -7. The time now is 04:48 AM.