Small business owners often struggle to collect their accounts receivable. Sometimes debtors actually dissolve their businesses in order to avoid paying creditors and then re-open later under a new or slightly different name. Frustrated creditors often give up on unpaid invoices thinking that they have no recourse. But there may be hope.
One legal avenue that may be available to unpaid creditors is a claim under the theory of successor liability. When determining whether a successor business can be held liable for the debts of its predecessor, courts in Illinois generally look at four factors:
1. Is there an express or implied agreement that the new (successor) businesses will assume the liabilities of its predecessor?
2. Did the new business consolidate or merge with the old business?
3. Is the new business a mere continuation of the old business?
4. Was the new business formed for the purpose of escaping liability for the old business’s debts?
One of the leading cases on successor liability in Illinois is Vernon v. Schuster, 179 Ill.2d 338 (1997).
If you are a small business struggling with collections, call DeBlasio & Gower LLC. Our experienced business litigation attorneys can be reached at (630) 560-1123 or via our website at https://www.dgllc.net we are here to help.
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