5 ms·

Don't believe everyone here saying, "You're screwed, you'll never see it." Screw that... $8k is a lot of money. Sue them in small claims court. Generally if yo

Don't believe everyone here saying, "You're screwed, you'll never see it." Screw that... $8k is a lot of money. Sue them in small claims court. Generally if you have a legal claim under $10k, you can get your money back in small claims, without even hiring a lawyer. Gather up every piece of documentation, email/IM/SMS correspondence, proof of work, etc, and bring your case in front of a judge. You'd be surprised how quickly some people can come up with money when they're staring down the barrel of a legal motion.

tptacek 11y ago
His debt will be with the corporation, so by the time he'd be ready to see a court room, the company would be gone. Suing a collapsing startup is a waste of time. (The small claims limit in California against companies is $5k, FWIW).
- robgibbons 11y ago
  As far as the debt being with the corporation, if a judge decides the founders acted negligently, s/he can "pierce the veil" of liability and hold them personally liable. Good to know about the Cali small claims limit.
  - tptacek 11y ago
    That's true of all torts, but not paying a consulting contract is very unlikely to be considered a tort; it's a contract dispute --- like, the archetypical contract dispute. The whole point of limited liability is that contract disputes end at the company.
  - davismwfl 11y ago
    While true that the corporate veil can be pierced in specific circumstances, it is not a common or a likely outcome especially for a contract dispute over an unpaid invoice. Piercing the veil from my understanding requires you to prove that the primary shareholders fraudulently represented the company, e.g. didn't keep the books separate from their personal finances, commingled personal and business funds, took all the money out of the business to hide it willfully, didn't follow the incorporation documents etc.
giarc 11y ago
I'm not sure how the small claims court in California works, but from my experience in Alberta, it would take multiple trips to SF to even get a court date (which may be months or years down the road). Even if you get a settlement you still have to collect it and if they declare bankruptcy, that is going to mean more court time and more money.
brudgers 11y ago
The $8k that the company owes to a consultant is likely to be way down on the list of things that suck that the founders of a failing startup are likely to be dealing with. On top of that, the unpaid consultant is in NY and the dispute resolution must take place in SF per the contract as described. If they were all in the same city, then the overhead of small claims is less. But the options for the consultant are flying cross country or hiring a local lawyer. That's good money after bad when pursuing actions against a corporation that has gone bust when the amount is a few thousand dollars.

tptacek 11y ago

His debt will be with the corporation, so by the time he'd be ready to see a court room, the company would be gone. Suing a collapsing startup is a waste of time. (The small claims limit in California against companies is $5k, FWIW).

robgibbons 11y ago
As far as the debt being with the corporation, if a judge decides the founders acted negligently, s/he can "pierce the veil" of liability and hold them personally liable. Good to know about the Cali small claims limit.
- tptacek 11y ago
  That's true of all torts, but not paying a consulting contract is very unlikely to be considered a tort; it's a contract dispute --- like, the archetypical contract dispute. The whole point of limited liability is that contract disputes end at the company.
- davismwfl 11y ago
  While true that the corporate veil can be pierced in specific circumstances, it is not a common or a likely outcome especially for a contract dispute over an unpaid invoice. Piercing the veil from my understanding requires you to prove that the primary shareholders fraudulently represented the company, e.g. didn't keep the books separate from their personal finances, commingled personal and business funds, took all the money out of the business to hide it willfully, didn't follow the incorporation documents etc.

giarc 11y ago

I'm not sure how the small claims court in California works, but from my experience in Alberta, it would take multiple trips to SF to even get a court date (which may be months or years down the road). Even if you get a settlement you still have to collect it and if they declare bankruptcy, that is going to mean more court time and more money.

brudgers 11y ago

The $8k that the company owes to a consultant is likely to be way down on the list of things that suck that the founders of a failing startup are likely to be dealing with. On top of that, the unpaid consultant is in NY and the dispute resolution must take place in SF per the contract as described. If they were all in the same city, then the overhead of small claims is less. But the options for the consultant are flying cross country or hiring a local lawyer. That's good money after bad when pursuing actions against a corporation that has gone bust when the amount is a few thousand dollars.