Can a Garnisment effect a Business?

ecsmith1973 · #1 07-25-2005, 04:29 PM

Good Afternoon,

About 4 years Discover card was granted judgement against me in the amount of $5000. Over the last 4 years I have tried to pay it down with little to no success. I have given them over $2000 over the course of 4 years but the principal has not decreased at all.

I called the company where the original judgement was made, but they sold it to an attorney firm that is now trying to garnish my bank account.

I own a small business (it is an LLC with an EIN. My SSN is not attached to my business account). Can this firm go after my business account?

I removed all the money from my personal account and put it in a seperate bank under my company which is an LLC. I was told that the firm cannot go after the business only me, but i am still worried.

Please advise.

Eric in Maryland

aaron · #2 07-25-2005, 05:11 PM

Quoting ecsmith1973

I own a small business (it is an LLC with an EIN. My SSN is not attached to my business account). Can this firm go after my business account?

I removed all the money from my personal account and put it in a seperate bank under my company which is an LLC. I was told that the firm cannot go after the business only me, but i am still worried.

If you have commingled your personal funds into a business account, and are now using that account (a) to shelter yourself from creditors and (b) pay personal bills and expenses, if the creditor finds out what you have done they may be able to convince a court to let them garnish against that account.

ecsmith1973 · #3 07-26-2005, 11:21 AM

Thank you for the reply. The company was a sole propritorship up until about 3 weeks ago. I removed all the money from the sole prop. account and opened a LLC account (in a bank that was more suited to the LLC)....it is a good business move. Can this firm still go after it?

If so, don't I have to be notified when they go to the courts?

E in Maryland

mwadkins1 · #4 07-29-2005, 12:58 AM

I'm not a professional, but I just started my own company and created an S-Corporation which is similar to an LLC in that it limits the liability of you personally. In some of my research I have read that it is not wise to co-mingle your personal finances with the company finances because the courts will be more easily convinced by a plaintiff that you were not operating as a separate entity in the first place and you should therefore be held liable for the full amount sought after.

The Sole Proprietorship you had for the last couple years could legally pay all your personal finances without question. This is the heart of a sole proprietorship, but when you changed it to an LLC that changes the way the finances have to work. If you operate out of your home you can have the company pay for a percentage of your household bills according to the square footage of your house and the footage of the office space used for business.

Check with your accountant. Actually, I think the whole issue can be resolved by finding out from your accountant how you need to separate your personal finances from your business.