If you think you might be sued after the dissolution of your business, it’s important to have a plan in place to help you navigate the legal proceedings and related costs. As you begin preparing, consider these 10 tips to help you get started with the process.
1. You Need an Attorney
If you receive a legal document informing you of a lawsuit, contact your attorney first. If you are contacted directly, don’t:
- Admit fault
- Make promises
- Explain any role you had in the matter
- Talk about your company’s current status
Take the caller’s name and contact information in addition to your notes on the claim. Inform the caller that you will be in touch with your legal council.
2. Follow Your State Statute’s Dissolution Notification Methods
By following your state’s dissolution notification procedures, you can effectively limit the amount of time for others to bring injury lawsuits. Without the proper notifications, people have a much larger window for bringing lawsuits against the company.
3. Maintain Your Corporate Records
After you close your doors, keep your business records organized and accessible. In many states, a business will continue to exist in the eyes of the law, regardless of dissolution, for the purpose of settling remaining or open claims. Check with your local laws regarding the disposal of claims against dissolved enterprises.
4. Understand the Statute of Limitations
The laws regarding the statute of limitations for bringing suits against business, especially dissolved businesses, change depending on the state. Before moving forward, pinpoint your liabilities and understand the relevant laws on the time limitations for pursuing a legal action against the company.
5. Manage Your Liquidation Distribution
For manufacturers, your products may possibly cause future injuries, so you might want to reserve a portion of your liquidation distribution for the time period where you are vulnerable to lawsuits. For incorporated companies, claimants can only recover amounts equal or lesser than your distributions.
6. Case Dismissal
Have you followed all notification procedures? Has the period for bringing suits against your company expired? If yes, your attorney may be able to get the case dismissed early on. This will help you cut legal and settlement costs considerably.
7. Rejecting Claims
In some states, you are allowed to reject claims. This forces the claimant to take action within a certain time period or forfeit the case. If this happens, the claim is disallowed and your attorney may be able to get the case dismissed.
8. Selling Your Operating Assets
If you want to avoid liability, you may be able to do so by selling your operating assets or business assets before business dissolution. Check with your state laws regarding the transfer of liability during a business sale and consult with your attorney.
9. Commercial Liability Insurance
If you don’t already have commercial liability insurance, you should probably invest in a policy during the designated time limitation for suits. This coverage may cover all or part of the costs associated with the legal process. Contact your agent to better understand the limitations of your coverage.
10. The Benefits of Court Proceedings
Generally, your legal team will probably advise against following through court proceedings because they are long and costly. Additionally, you may benefit more from a typically cheaper out-of-court resolution. However, if you stand to lose your entire distribution and there is no other relief, a full court case may be a better legal option. Keep in mind that this option will significantly increase legal fees.
If you consider these 10 tips, you’ll likely understand what to expect from the road ahead and be able to successfully navigate any obstacles you may face. Consider putting together a legal and consulting team to help you through the planning and dissolution process of your business.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.