Data Thieves and Dissolution

October 11, 2018

Data thieves and hackers don’t just target individuals. They also target corporations and LLCs. These criminals want to impersonate suspended or delinquent companies, resurrect them, and take out lines of credit in the companies’ names. The consequences of such attacks can be devastating.

Often data thieves prey on business owners who fail to formally dissolve their business after the business becomes inactive. Thus, a company interested in preventing the financial consequences associated with commercial identity theft must take steps to protect itself. One of the strongest forms of protection is formal dissolution and withdrawal.

It is critical for business attorneys to communicate this threat to their clients so they can advise on what legal action will best protect them against potential hacks. Failing to formally dissolve or withdraw means your clients’ business information is still available on state websites. These inactive businesses become prime targets for criminals.

What you and your clients need to know:

Identity thieves follow a familiar pattern. First, they use publicly available information that appears on secretary of state websites to search for inactive, suspended, or defunct businesses. They look for identifying information such as EINs, agents for service of process, and relevant documents.

Second, identity thieves place the corporation or LLC back into good standing with the secretary of state. One of the most common ways this is done involves reinstating a business license that has been revoked or suspended by creating a new mailing address to receive the certificate of good standing or other paperwork.

Third, the thieves can act on behalf of the newly reinstated company by seeking new loans or lines of credit. They take advantage of the protection offered by a corporate or LLC structure, which means victims may be liable for debts the thieves incur while impersonating the business owners. Another risk is that the identity thieves will submit fraudulent tax returns on behalf of the business. In the first half of 2017, the IRS reported that 10,000 tax returns showed signs of fraud.

Keeping your clients informed about risks like this is one of the many ways working with a technology platform like Legalinc can benefit attorneys who would otherwise go it alone. If you’re interested in other ways to serve your business clients better, Legalinc’s software automates 30-plus state filings, including dissolutions.

To find out more, create your free account today.

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