What Happens When You Sue a Business That’s Gone Out of Business?


Some laws address claims made against closed businesses depending on your state. When a business or corporation is dissolved, the law requires a certain period where claims can be made before the company finally ceases to exist. 

When Can A Closed Business Be Sued?

In some states, one of the requirements for business owners wanting to close their business is to notify all their creditors and the entire public about the closure. Statutes mandate businesses to set a time limit to allow creditors or clients to file lawsuits. If the company or business fails to follow these steps, the limitation time will be extended for a longer duration. 

In some instances, companies may be required to provide a limit of three years after closing the business to receive lawsuits. During this time, it is expected that the company keeps all its records and other relevant data together even when they are no longer in operation. 

Are Owners Liable After Dissolution?

You may be wondering if you can sue a dissolved corporation or a business that has already closed down. Some business owners have a misconception that they will be shielded from liability and claims immediately after they close their corporation. The question is, what happens to the veil of incorporation when a business is closed? Does it still apply after the corporation has been dissolved? Here are some things you should know before you close down your LLC.

Pay Your Creditors 

The first thing to do before you dissolve any business is to pay all your creditors. You need to settle all debts before sharing any of the assets and distributing profits to other shareholders. If you share assets before settling creditors, all the owners can be sued by the creditors to collect the assets distributed. This is why it is important to send out a notice to all creditors before dissolving any corporation.

You can’t simply shut down your office and take all your assets without paying your creditors. If there are no assets, creditors can sue to collect the assets of the company from the individual owners of the LLC.

Comply With The Statute Of Limitation

There are some liabilities, which may be present or unresolved, which may have been overlooked. After you close down your business, you need to wait until the time prescribed by the statute of limitation has passed. If any creditor has any claim to make, you can resolve it. Closing up and leaving immediately would seem like the owners are trying to evade creditors. You need to wait for them to come forward until the time limit elapses.

Protection From Past Claims

If your corporation is sued long after it has been dissolved, at a time when there was no known creditor, the owners can be protected. For instance, a claim was brought against a business three years after its dissolution, of which the owners were unaware. They will be protected from such liabilities. However, if the owners were aware of such a claim or lawsuit and still dissolved the company, they will be held personally liable according to the amount distributed to them during the dissolution.


On a final note, the closure of a business does not exempt its owners from lawsuits or liabilities if the right procedures were omitted. Before you close your business, ensure you have all your creditors on notice to avoid any future lawsuits.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.