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Question
My husband has a single member llc in Michigan. We are closing down the business and have $25,000 in credit card debt. The debt is in the name of the LLC but we use his social security number, not a federal id number. I read that we are not liable for this debt. My question is, how do we go about handling the credit card company? Do we just call them and say "Sorry we're an LLC you're not getting paid"? Are there forms that they will have us fill out? Does this information go to the State? Are there any ramifications of doing this? Will this affect his credit rating? Will we be harrassed by debt collectors? I know I have a lot of question, but I want to know all the possibilites before doing this.
Amy,
Though I am not an expert on LLC's this is what I do know. Being an LLC does offer some protection, if the LLC has an official FEIN and more than one member. However, if you have a single member LLC, the IRS regards this as a sole proprietorship and as such, it is my understanding that it is no different than the person having the debt. Single membership LLC's and Sole Proprietorships are simply looked at as being basically the same as a DBA and the individual is responsible for the debt. My attorney and tax consultant are under the impression that the laws now allow single member LLC with the same protection.
I would check with an attorney in your state to make sure.
I did find this website that might also help you: http://www.standardlegal.com/law-library/LLC-vs-Inc.html
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Answers by Expert:
Michelle Dunn
Expertise
As one of the Top 5 Women in Collections, one of the Top 50 Collection Professionals, and winner of the Business Excellence award, I can answer any questions about debt, debt collection, improving business credit, creating a credit policy, enforcing a credit policy and collecting on past due accounts. I can also answer questions in regards to starting a debt collection agency since I have been a bill collector for over 24 years, started and ran my own collection agency for 8 years, and maintain my 12 year old Credit & Collections Association for members of the credit & debt collection industry. I am also the author of the popular and award winning book "Starting a Collection Agency, how to make money collecting money" now on it's 3rd edition. This book has won a the Writers Digest self published award as well as the New York Book Festival Award. I am a repeat contributor to the Wall Street Journal, and have been featured on NPR, CNN, as well as many other national radio and television programs. I have also been featured in national publications such as the Wall Street Journal, Forbes, Smart Money, MSNBC and much more. I have 17 published books to my name and am an accomplished speaker and consultant. I currently write 9 columns for newspapers, magazines and online portals worldwide.
Experience
I have over 24 years experience in debt collection, I started and ran my own collection agency for 8 years and I am the founder & owner of my Credit & Collections Association that I founded in 1998. www.credit-and-collections.com
Organizations
My Credit & Collections Association, I was also a member of the American Collectors Association and Plymouth Chamber of Commerce for 11 years. I am a member of many writing groups as well as my local Women Inspiring Women chapter. I am a member of Know More Media as an expert for their blog on business credit.
Publications
Business NH Magazine, Smart Money Magazine, MSNBC, CNN, Forbes.com, The Wall Street Journal, Home Business Magazine, Entrepreneur Magazine and website, many books, newspapers and television programs as well.
Education/Credentials
I have written 17 books in my collecting money series and one for Entrepreneur Press called the Ultimate Credit and Collections Handbook. My newest book is being published by John Wiley & Sons in May titled, The Guide to Getting Paid, how to weed out bad paying customers, collect on past due balances and avoid bad debt. This book is also being sold to many colleges as a text book.
Awards and Honors
My book Starting a Collection Agency, how to make money collecting money won an award from Writers Digest and the 2007 New York Book Festival in the "How to" category. I have won 2 awards from Dun & Bradstreet and Governor Jean Shaheen. I was nominated as one of the Top 5 Women in Collections twice as well as having been selected as one of Collection Advisor's Top 50 Collection Professionals by my peers.
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