Dissolving business with outstanding work

Discussion in 'Growing and Managing a Business' started by metadog, Dec 16, 2009.

  1. metadog

    metadog
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    Hi! I have had a graphic design S Corp for around 10 years. Just me and just on the side, I have a day job now. At one point, this was the focus of my life, but the economy and the needs of my family slowly killed off the business. 2009 was the worst year ever. I had a niche servicing local ad agencies, picking up their overflow. Many of them are simply gone now, or are barely surviving. So, I have been using family money to pay the business expenses and that has to end, so I am going to shut it down. I hope to still pick up the occasional side project, but I guess I will just be selling "me" instead of my company.

    Of my outstanding issues, this one bothers me the most: I designed and built a web site for a client two years ago (content management system included). It never went live because the client would loose interest in the project. When they would come around and want to get engaged, I would mention the money that they owed me and they would disappear again. This process would repeat about every 6 months, sometimes with other people in the company. I am tired of it now, and I am dissolving the business. How should I handle things with them? I hate to hand everything over to them because they still owe me money. Conversely, if I dissolve the corporation, could they somehow come after me personally if they got motivated? Thoughts on this?

    Thanks!
    -M
     
  2. Fergal

    Fergal
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    Welcome to Business Advice Forum metadog and thanks for asking your business questions. Sorry to hear that business has not been good in 2009. On the bright side, I'm glad to hear that you have a job now.

    Has your client paid anything towards the site? If not, then I would suggest that you have nothing to worry about and you could even consider selling the site to someone else.

    Do you have a written agreement with the client?

    You could try contacting the client and explain that you are dissolving the business and tell them that is their last chance to pay up and get ownership of the site. If they are reluctant, you might offer them some discount, on the basis that some payment is better than none.

    If there is a large amount of money involved, you should consider getting some professional legal advice. This will allow you to determine if it is worth pursuing the client for the money you are owed.

    On another note, are you sure that you want to dissolve the business? Would it be possible for you to significantly reduce or even eliminate the business costs, and keep the business going on a part time basis?

    Good luck with everything and please post back with your thoughts.
     
  3. metadog

    metadog
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    The deal was done entirely via email, a mistake on my part that I plan to never repeat. The total fee was $1600. $500 in trade of services, then $1100 in cash paid half up front, then the other half upon completion. That ends up being $550 that they still owe me. To add insult to injury, they had contacted me for a small design job, only $75. I did it, invoiced them and they never paid. I refuse to even think about their web site until they pay me the $75.

    As far as dissolving the business, the expenses aren't extreme, but they are more than what I made in 2009. Tax prep, domain ownership and hosting, computer parts and upgrades, toner, etc. Not a lot, but I need to pull down at least $2000 a year to cover everything and in 2009 I made around $450. I am hoping things will get better, but there is no guarantee. I currently have a loan from my personal account to my business of around $1400. I can't keep that up, the wife will divorce me... ;)

    I would hate to shut things down, but I'm not seeing a lot of choices.
     
  4. seanstevens

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    Hi Metadog. Under the rules of the S-Corp, it is a seperate legal entity to you as an individual. So unless you have signed any personal guarantees you are perfectly safe and they cannot chase you at all. They cannot come after you as an individual.

    What have they said to you regarding the overdue payment? If they are not disputing it then you would have a couple of choices. 1. Small claims Legal action. 2. Use a debt collection agency (The US rules FDCA are very strict, so make sure it is one who is registered in your area).

    Do not let them get away with it. This is the one thing that really annoys me.

    I'm in the debt collecting business (not US) but if you need any advice let me know and I'll see what I can come up with or point you in the right direction.

    As for the business; do you use Twitter to advertise? I know a few designers, web guys who make decent money on there. Especially with Twitter background at $40 a pop paid in advance through paypal..
     
  5. Fergal

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    Am I right in understanding that they owe you $625 in total ($550 + $75)? If it was me I would probably tell them that they can have the site, after they have paid the outstanding money owed and that they won't get anything until it is paid in full. After that I might send a couple of letters and make a couple of calls, but that would be it (sorry Sean).

    I can understand that it is difficult to let them get away with owing you money. However, in reality it is very difficult to get paid by someone who doesn't want to pay you. There comes a point when you have to ask yourself, is it worth incurring more costs (debt collection and or legal fees) in order to chase the $625 you are owed. There is also the emotional energy and stress that you would have to put into collecting it. Sometimes it can be better to put these things behind us and learn from the experience.

    It might be worth noting that those emails, are a written record of the agreement should you decide to pursue things further.

    Good luck with everything and please post back with your thoughts.
     
  6. metadog

    metadog
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    So, if I dissolve the company, could they come after me personally then? Or once the company is gone, so is the responsibility? Thanks for the help!

    -M
     
  7. VenalTech

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    If they won't pay you, I recommend writing a review on www.talkburst.com to make sure it doesn't happen to anyone else.

    TalkBurst content shows up at the top of Google, so anyone who searches their name will find your review (Try searching "Tayla Burge" or "Sam Salopek" - shows up #1 on Google) even if they end up paying you, you should still write a review that reflects your difficulties getting a timely payment.

    To answer your question: Your responsibilities don't disappear when you dissolve the corporation. No one can come after you personally, but they could come after your corporation, which you would be representing. There are two entities at play "You" and "You representing the corporation".
     
    #7 VenalTech, Mar 3, 2010
    Last edited: Mar 3, 2010
  8. Fergal

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    I wouldn't worry about that if I was you. They did not pay you in full for the work you did, hence they are not entitled to it. If they do become heavy handed at a later time, you will still have the files and code for the website you designed for them. If you were to come under any legal pressure (which I believe is unlikely) you could give them the files at that time.

    In summary, you should do what's best for you and don't overly concern yourself with a client who did not pay you for your work. Keep copies of the emails passed between you and the client and copies of all the coding and design work you did for the client, in case you need them at some time in the future.
     
  9. seanstevens

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    You are a different legal entity to the S-Corp so as long as you have not signed any personal guarantees then they cannot come after you as an individual. This is the whole point of having companies that limit the exposure.
     
  10. seanstevens

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    Whilst I agree with you that a "review" should be written I would not suggest writing on a social site (sorry) as this has no impact on their credit rating which is the most important thing. There is a US credit agency called Cortera who have a new service (free) that allows you to report non-payers. This will have an impact on them as other lenders use the service to check companies before doing business with them.
     
  11. VenalTech

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    A review on the web is the best he can do. Cortera isn't going to let him report anything with just some e-mails.

    I think you underestimate the power of Google. A negative review showing up on there, when their name is searched, is far worse.
     

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