Corporate Law LLCs and personal liability

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jeffn367

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i work(ed) for a company that the owner set up as an LLC. I am assuming it is in the state of Rhode Island. In the 8 months of business he has bounced several checks to suppliers and employees (mine included). He may have also not deposited withholding and other taxes with the Fed. He is under indictment in S. Carolina for passing bad checks (a supplier swore out a complaint). I understand he is declaring bankruptcy or has declared bankrupty. My questions are:

1. he thinks as an LLC he is protected personally from the above acts- is he?
2. has he broken any Federal laws by bouncing paychecks?
3. do i have any legal recourse short of a lawsuit?
4. under bankruptcy laws where do i fall in line in regards to my commissions and paycheck?
 
A corporate shield will not protect him in the event his business practices were not bona fide. It is not absolute protection.

"Piercing the corporate veil" refers to instances when the corporate entity will not protect the personal assets of stockholders, officers and directors. There must be a direct distinction between the corporation and the individual and if the individual uses the corporate entity to conduct personal business or a tortious or fraudulent activity, the distinction is destroyed. The individual may become personally liable. Corporate shareholders, directors and officers also mayface personal liability for the breach of contracts or tortious activities and civil and criminal penalties may be imposed.

My understanding is that under the Federal Bankruptcy Act, employee salaries are amongst top priority but do understand that it might be a while and you might not even receive what you are hoping. If he knowingly sent you paychecks that he knew would bounce, he may be in violation of federal and state laws. Have you been contacted by the prosecutor in this case? Has there been a trustee appointed to run the business?

Originally posted by jeffn367
i work(ed) for a company that the owner set up as an LLC. I am assuming it is in the state of Rhode Island. In the 8 months of business he has bounced several checks to suppliers and employees (mine included). He may have also not deposited withholding and other taxes with the Fed. He is under indictment in S. Carolina for passing bad checks (a supplier swore out a complaint). I understand he is declaring bankruptcy or has declared bankrupty. My questions are:

1. he thinks as an LLC he is protected personally from the above acts- is he?
2. has he broken any Federal laws by bouncing paychecks?
3. do i have any legal recourse short of a lawsuit?
4. under bankruptcy laws where do i fall in line in regards to my commissions and paycheck?
 
As of yet i have no official notification of bankrupcy only from the word of another ex-employee. Do you know the federal agency i should contact to file a criminal complaint? Do I contact a Federal Labor Prosecutor? Is there such a thing? Do I need to sue him in civil court to get my commissions, or would this fall under the payroll issue?
 
You cannot file a criminal complaint. You may wish to find out more information and contact the prosecutor in the case. If bankruptcy is filed then you would file as a creditor in that case and would receive 'priority.'

Priority exists for two kinds of employee claims
(1) unpaid wages of employees
(2) unpaid contributions of employee benefit plans.

The priority for unpaid wages covers up to $4,000 (including salary, commissions, vacation and severance pay) earned within 90 days before the bankruptcy filing. Unpaid wages not within those two requirements are treated as general, unsecured claims and paid in the same manner as other creditor claims.

Originally posted by jeffn367
As of yet i have no official notification of bankrupcy only from the word of another ex-employee. Do you know the federal agency i should contact to file a criminal complaint? Do I contact a Federal Labor Prosecutor? Is there such a thing? Do I need to sue him in civil court to get my commissions, or would this fall under the payroll issue?
 
I have another question. I believe this owner has not paid the withholding taxes he has taken from our checks. This must violate state and federal laws.

Who would have jurisdiction? and what is the penalty for this? i have filed both taxes (using W2s) and am awaiting a response from the IRS and state of Georgia. When I trie e-filing they were rejected because they could not locate the employer ID number.
 
You can factor this into the tax liability that you may owe. Perhaps your employer didn't report your wages?

Originally posted by jeffn367
I have another question. I believe this owner has not paid the withholding taxes he has taken from our checks. This must violate state and federal laws.

Who would have jurisdiction? and what is the penalty for this? i have filed both taxes (using W2s) and am awaiting a response from the IRS and state of Georgia. When I trie e-filing they were rejected because they could not locate the employer ID number.
 
I believe that is correct, but won't know for sure until my return is reviewed by the IRS. Again, which federal laws has he violated by doing this? Do I need to report him, or will the IRS go after him without me taking action?
 
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