Can You Sue a Business That No Longer Exists?

Published on July 10, 2024
Photo of Statue of Justice

Filing a lawsuit against a business that no longer exists can seem daunting. You can indeed sue a dissolved company, especially if it failed to wind up its business and dissolve properly. Closed businesses may still carry liabilities that can be pursued, such as unpaid debts or unresolved obligations.

There are various motivations behind such lawsuits. Creditors may seek repayment of outstanding debts, while partners might leverage legal actions to settle disputes. It is essential to identify responsible parties, even after the dissolution of the business, which may require the experience of a business dispute lawyer.

Different situations warrant different approaches. For instance, in certain cases, it might be possible to pierce the corporate veil and hold shareholders personally liable. Knowing the legal avenues available is crucial to successfully proceeding with your claim. For more in-depth guidance, seeking professional advice can ensure you navigate these complexities effectively.

Legal Framework for Dissolved Businesses

There are specific legal frameworks dealing with suing dissolved businesses, including corporate veil piercing, national laws, and state laws such as those in Texas. Understanding these aspects is critical when considering a lawsuit against a dissolved entity.

Understanding Corporate Veil Piercing

Corporate veil piercing allows plaintiffs to hold individual shareholders or owners personally liable for corporate debts. This is possible when a business hasn’t adhered to legal formalities, such as proper dissolution procedures or when fraud is involved.

Proper scrutiny of financial transactions and company records is essential. Courts have discretion in these cases and often look for evidence of commingled assets or intentional deceit by the company’s operators.

This approach ensures that even if a company is dissolved, those responsible may still be held accountable.

Applicable State and Federal  Laws

Each state and the Federal l laws provide  frameworks that govern how dissolved businesses can still be subject to lawsuits. For instance, certain jurisdictions allow lawsuits against dissolved entities if they still have outstanding liabilities.

In many states, the dissolution process includes a winding-up period, during which claims can be brought against the company. This period varies but typically lasts a few years.

Dissolved corporations generally need to notify creditors and provide a method for dealing with outstanding claims. This legal requirement exists to ensure that the company’s remaining assets can be used to settle its obligations.

The Role of Texas Law in Business Dissolutions

Texas law requires strict adherence to dissolution procedures for both LLCs and corporations. According to Texas statutes, an LLC must follow specific steps to dissolve properly, such as notifying creditors and settling debts.

If these steps are not followed, the LLC might still be sued post-dissolution. For example, if an LLC in Texas fails to meet its obligations during the wind-up period, it remains vulnerable to lawsuits.

Texas provides a standard wind-up period, often three years, during which claims can be pursued against the dissolved entity.

Adhering to these regulations ensures businesses are not exploiting dissolution to escape liabilities. It emphasizes the importance of thorough and proper winding-up practices to protect both creditors and the legal system’s integrity.

Conditions Under Which You Can Sue

Understanding when you can sue a dissolved or no longer existing business involves examining liability after dissolution and the statute of limitations for such cases.

Liability After Dissolution

Even if a business dissolves, certain situations allow for legal action against it. If the business did not properly wind up its affairs, it may still be liable for unresolved obligations. For instance, a company must settle debts, including taxes and employee compensation.

Anyone acting as a representative of the business must ensure they have followed specific legal steps. Failure to do so could mean individual liability. Trustees or liquidators also bear responsibility for ensuring all statutory requirements are met before business termination.

More importantly, different business structures, such as corporations vs. limited liability companies, have varying rules. Corporations might require court involvement to resolve liabilities. Liability persists mainly to safeguard creditors and other claimants.

Photo of Attorney

Statute of Limitations Considerations

The statute of limitations significantly impacts the ability to sue a dissolved business. This timeframe varies by jurisdiction and claim type. Contractual claims might have different limits compared to tort claims. Lawsuits must be initiated within these periods to be considered valid.

For example, in some areas, a business must maintain records for several years post-dissolution. Any obligations accrued during this period can still be actionable. Certain claims might extend the statute if discovered later, such as fraudulent activities uncovered post-closure.

It is crucial to consult local laws and possibly a lawyer to navigate these timelines. Missing the statute of limitations could mean forfeiting the legal right to sue, underscoring the importance of timely action.

Legal Procedures and Challenges

Suing a business that no longer exists involves several specific legal procedures and challenges. The process includes initiating the lawsuit and serving notice to the dissolved entity, each with its own complexities.

Initiating a Lawsuit

To begin a lawsuit against a dissolved business, an individual must first confirm that legal grounds exist. This often involves validating that the dissolution process was not properly executed. In cases where a company failed to wind up its affairs, legal action might still be viable.

Petitioning for the company’s restoration to the register of companies is typically necessary to sue. This step ensures the entity regains its legal standing temporarily. Various jurisdictions have specific rules about the restoration procedure. Therefore, consulting an attorney experienced in business law is crucial.

Financial considerations also play a role. Legal fees and court costs can accumulate quickly, and recovery might not be guaranteed. Exploring alternative fee arrangements, like contingency fees, can mitigate some costs.

Serving Notice to a Dissolved Entity

Once the lawsuit is initiated, serving notice to a dissolved entity becomes the next hurdle. Legally, notice must be served to the last known registered office or any known directors or officers. This ensures compliance with legal requirements, giving the dissolved entity an opportunity to respond.

Locating the last known registered address of the business or its directors can be difficult if records are outdated. In some instances, a court order may allow for substituted service methods, like publishing the notice in a local newspaper.

Properly serving notice is critical. Failure to do so can invalidate the lawsuit, wasting time and resources. Legal assistance can be essential in navigating this step effectively.

Alternatives to Litigation

When dealing with a business that no longer exists, alternatives to traditional litigation can provide more efficient and cost-effective solutions. The following approaches allow for resolution without the need for a lengthy court process.


Mediation involves a neutral third party who helps both sides come to an agreement. This option is often less expensive than litigation and can be quicker. A mediator facilitates discussions in a structured manner, ensuring all parties voice their concerns.

Mediation can preserve relationships, which can be vital if future interactions are likely. Additionally, the outcomes can be tailored to the specific needs of the parties involved, providing more flexibility than a court ruling.


Arbitration is another alternative where a neutral arbitrator makes binding decisions after hearing each side’s arguments. This is generally faster than court proceedings and involves less formality.

Arbitration can also be kept private, which benefits sensitive business information. Selecting an experienced arbitrator, often a business dispute lawyer, ensures a fair process. Furthermore, the costs are usually lower compared to traditional litigation.

Successful Claims Against Defunct Businesses

In some instances, plaintiffs have successfully sued dissolved companies. This typically happens when the companies failed to properly wind up their affairs. For example, inadequate notice to creditors can result in legal action even after a business has dissolved.

Federal and specific State l laws often allow creditors to pursue debts against former officers or shareholders of the defunct business. In one case, a creditor pursued a defunct LLC and secured payment through the personal assets of formerly liable members.

Another successful claim involved a dissolved business that had retained undistributed assets. The plaintiff was able to argue that these assets should have been used to settle outstanding claims. This underscores the importance of thorough compliance with dissolution procedures.

Finally, the improper dissolution of a business could cause individual exposure to the dissolved business’ directors and officers. 

Notable Failures and Lessons Learned

Conversely, there are notable cases where plaintiffs failed to recover from defunct businesses. One common issue is the lack of remaining assets; once a company has liquidated all assets, there’s often nothing left to claim. For instance, suing a business that has been dissolved for years with no assets available is usually futile.

Another failure arose from the inability to establish personal liability for former business owners or officers. In these cases, courts typically found the individuals were shielded by the business structure, especially if no fraudulent conduct was proven.

Lessons from these cases emphasize the need for timely action and thorough investigation into any remaining assets or potential personal liabilities of business owners. Proper documentation and adherence to national laws surrounding business dissolution are also critical.

For additional information or help on this type of matter, contact our law firm.

Category: Uncategorized