If I own an internet company and we close down do I have to pay out independent contractors?
I own an online marketing company and we are closing down. Do i have to pay out the independent contractors who have made money before it closed down? Or could the company close down and legally not have paid them?
Although I am an attorney licensed to practice law in California, what follows is not to be construed as legal advice, nor am I in any manner undertaking to represent you in a legal capacity. (Ok…now that the boring disclaimer is out of the way…) The answer to your question depends upon a number of factors including (but not limited to these 3); 1) the jurisdiction in which your business operates; 2) the form of your business entity; 3) the contractual relationship that was formed between the company and the independent contractor. In California, for example, if you formed and operated your business as a limited liability entity (Corporation, LLC or Limited Partnership), you may be able to dissolve the business by filing a certificate of election to wind up and dissolve and a certificate of dissolution with the Secretary of State. You would publish in a newspaper of general circulation in the county where your business is located a notice of dissolution. This step gives vendors one year to file suit to try to collect, as opposed to the four years statute of limitations on written contracts.
If you did not organize as a limited liability entity, it is highly likely that you can be sued personally for the debt. If your contract verbiage provides that the parties to the contract are Company A, a California Corporation, and B Subcontractor, then your contract restricts recovery to the corporation, and the debt would not be recoverable from you personally, unless the prospective plaintiff is successful in piercing the corporate veil. This is generally accomplished by pleading that the business owner and the corporation or llc are a sham and under the alter ego theory if the court decides that equity favors the Plaintiff, you can be held personally responsible for the debt.
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