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Should I dissolve my company if it is under investigation?

Posted by Clyde Hutchins | Oct 04, 2016 | 0 Comments

When faced with an investigation by the Attorney General's Office, a common consideration for single owner limited liability companies is whether to dissolve. It may seem that logic would dictate that dissolution would end the investigation, and consequently, any liability or civil penalties that might flow from the investigation. Moreover, in the case of Wyoming limited liability companies, the state has been known to dissolve them for failure to respond to a subpoena. One might think that it makes sense to ignore the subpoena and allow the state to dissolve the company.

However, things are not so simple. Dissolution, whether voluntary or involuntary, can expose the company owner to increased liability. The limited liability company form is specifically created to provide limited liability for the company owner. This gives the owner peace of mind that he will not be held liable for many of the actions or omissions of the company. When a company is dissolved, the owner can lose that limited liability protection, especially when the company is involuntarily dissolved by the state.

Additionally, under the consumer protection act, the individuals involved in the alleged violation can be held directly liable irrespective of the limited liability company form. The consumer protection act essentially creates a "piercing the veil" option to allow consumers to proceed against those directly involved in the wrongdoing. Dissolution may have no effect on the potential liability of a company owner directly involved in the violations.

About the Author

Clyde Hutchins

Clyde Hutchins is the founder of Harmony Law. Prior to opening Harmony Law, Mr. Hutchins worked in the Wyoming Attorney General's Office for several years where he developed a strong consumer protection enforcement unit. In that position he led over 120 investigations and enforcement actions under the Consumer Protection Act. He worked on numerous joint cases with the Federal Trade Commission and other states, including Colorado, on consumer protection matters. Mr. Hutchins is also a contributing author to Consumer Protection Law Developments, Second Edition. Previous to his work in the Attorney General's Office, Mr. Hutchins was in private practice in Anchorage, Alaska where he was the chief litigator for a firm. Mr. Hutchins represented municipalities on various matters. Mr. Hutchins provided counsel to businesses and investment advisors regarding compliance with securities laws. He was also a bond lawyer and worked on municipal financing matters. Prior to that, Mr. Hutchins practiced civil litigation with a law firm in Cheyenne, Wyoming. Mr. Hutchins devotes his spare time to his family, traveling and enjoying the great outdoors.

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Harmony Law is one of the few law firms in Colorado and Wyoming that focuses on consumer law. Mr. Hutchins is a member of the National Association of Consumer Advocates and state chair for Wyoming. If you have a consumer law issue, please feel free to call 970-488-1857 and speak with Mr. Hutchins.

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