Being Sued Personally for Services Rendered for a Now Defunct LLC

[technicallydeprived]

My question involves business law in the state of: UT

I owned a business that was setup as a LLC with a single member, which was myself. During the operation of the business I contracted with an acquaintance that owned a small graphics design company to design a website for my company. There was no written contract, only verbal discussions about price, timeframe, etc.

The web designer designed most of the site (about 65 to 70%), but never fully completed it, but enough to be somewhat usable. I found out later that the main image on the homepage (and possibly others) was actually a copyrighted stock image that he did not pay to use- he stole it. I also found out in a subsequent conversation with him that he has thousands with illegally obtained copyrighted images that he trades with a stock photo piracy ring. I got uncomfortable with the whole situation and the site was taken down, coincidently I went out of business about the same timeframe. I'm convinced the extended timeframe (1 plus years) it took for him to finally get most of the website up contributed to the business' failure.

As mentioned the LLC expired and no business has been transacted in about 2 1/2 years. I recently received notice that I was being sued, not the out-of-business LLC, by me personally for a cost he has valued his work at, which is more that we ever discussed.

Questions:
- Can he sue me personally for the web design or am I protected by the LLC since all discussions and work was transacted on behalf of that entity?
- And since the LLC is now out of business (and has been for 2 1/2 years) and has no remaining assets is he out of luck in ever collecting against it?
- If he has no legal recourse against me personally, what do I do to get the case dismissed?

Thanks in Advance!

[Mr. Knowitall]

You are free to defend against the suit by contending that the contract was with the LLC and not you, and thus that you aren't responsible for the debt. He is free to try to convince the court otherwise.

You can bring a motion with the court to try to resolve the case based upon this issue. If this isn't in small claims court, you may wish to hire a lawyer to assist you. If it is, make sure you take your documentation of the transactions, shut-down of your LLC, and evidence that this person knew (despite the lack of a written contract) that you were hiring them on behalf of the LLC and not in your capacity as an individual.

[SChinFChin]

Just want to add a few addtional issues here.

First, as Mr. Knowitall mentioned, you can argue that the work was done for the LLC, and not you. You should also document the unsatisfactory nature of the work. You should also send your friend a formal notice via certified letter that he is using copyrighted works of others, and you will notify the appropriate authorities.

Now, you mentioned the LLC has not conducted business for 2-1/2 years. With this, there are a few more issues to consider.

First is if the LLC was formally dissolved, and what ceritfication you made when it was done?? I conducted business via an LLC, which ceased operations after the business was sold, and was advised by my attorney NOT to formally dissolve the entity for liability protection issues. I got an employee whose attorney filed notice to sue for amounts beyond his workman's comp, (about a million??) so I cannot certify that "I am not aware of outstanding claims against the LLC", nor should I declare that "all future claims should be directed to me" as normally is the case.

With the LLC in place, not dissolved, claims would be directed against it, and then determined that it has no assets.

The other issue, which is more "state specific" is what happens if the formalities for maintaining the LLC is not maintained such as paying the annual LLC fees. My attorney advised that here in NY State, the liability shield might be jeopordized if it is not paid, but it could be re-established once the past due fees are paid, and if the state did not get around to formally dissolving it for the lack of payment, legally two years, but normally longer, due to paperwork delays. He says the state would then dissolve it "by proclamation".

This last issue of the state dissolving it, and what legal implications it has he tells me that he has to more formally research if it comes to that point. This is because I did not declare that claims be directed against me, and he is not certain what implications, if any, that has, and it would cost me $800 or so to research. Any legal beagles out there who may know the answer to this?? I chose not to pay the $800, as LLC fees are only $100/year for defunct entities with no activites, and I can choose not to pay it for two or three years, at which point I'll know how real the lawsuit is.

You did not go into the issues of what happened after the LLC ceased operations, and what formalities you maintained, i.e filing formal dissolution paperwork, or continue paying the annual fees as may be called for in your state.