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Debt Collection from a Corporation in North Carolina


There are additional factors that need to be discussed with your Raleigh commercial collection lawyer if your business is owed money by a corporation rather than an individual. Does the company have assets or is it insolvent? Can a civil law suit be initiated to collect from the owner of the Raleigh business rather than the company itself? What court should I file this civil litigation in?

First let’s remember the three basis of debt collection litigation:

1) Is the filing of this lawsuit going to leverage the debtor into an immediate payment or the formation of a payment plan?
2) Do we have the paperwork in place to obtain a judgment efficiently and cost-effectively?
3) Can we collect on the judgment if it’s obtained?

When an individual owes your business money, it may make sense to proceed without an attorney in small claims court. Small claims court allows a quick opportunity to obtain a judgment without the assistance of counsel with an opportunity for a new trial at the District Court level if your small claims case is unsuccessful. However, with a business debtor, it often makes sense to proceed immediately with your debt collection action in District Court. Corporations are required to obtain counsel if they wish to defend a lawsuit in District and Superior Courts, which may be a factor in obtaining payment or, at a minimum, a payment plan from the small business debtor through settlement.

It’s also important to consider beforehand whether or not this debt is collectible from the company. Judgments are good for 10 years in North Carolina, which is effective in collecting from an individual. However, if businesses aren’t paying their debts, that company may not be around to respond to the civil summons, let alone in ten years. North Carolina allows businesses in good standing with the state to maintain their corporate shield, which generally prohibits individual owner liability. There are some exceptions to this rule.

First, if the business is not in good standing with the state, that business no longer is entitled to corporate protections; they are merely individuals doing business under a company name. At that point, owners are subject to liability. North Carolina also allows some creditors to proceed against an individual owner debtor by “piercing the corporate veil” of the business. This theory allows creditors to get judgments against an individual owner who simply uses his business as an “alter ego” to avoid liability. We’ll have more on piercing the corporate veil in an upcoming blog.

Contact a Raleigh business commercial/retail debt collection attorney to understand whether or not debts that your business is owed are worth attempting to collect via the institution of a civil lawsuit. Maginnis Law, PLLC is a Raleigh law firm with retail collection lawyers practicing in small business civil breach of contract litigation. The firm also practices in Cary, Wake Forest, Zebulon, Clayton and all cities in Wake County and Johnston County. Contact the firm today at 919.526.0450 or at www.maginnislaw.com to speak with a Raleigh lawyer who can give an initial consultation for your business law questions.

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