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Dec 4, 2019

Going out of business is a fear for most businesses and their clients. If you’re someone who’s had a client go out of business, leaving you without payment, then this is the post for you!

The Subtlety of Bankruptcy

Bankruptcy can be a very subtle process. One moment you’re receiving regular payments like clockwork from a client, the next they’ve started delaying their payments by several weeks. This is the first sign that there has been a hiccup. They can make up excuses like “gee we have a new billing clerk”, or “gee we were waiting for funds to come in from ABC company that owed us”. Eventually, the excuses will just stop coming because they’ve gone under and filed for bankruptcy.

Know Who You’re Dealing With to Protect Yourself

As sudden as bankruptcy can come, there are always warning signs before you’re hit with the consequences. So what can you do to make sure you’re prepared for the incoming storm that it will inevitably kick up? Your biggest priority is to know who you’re dealing with.

We cannot stress enough how important it is to ensure that you know who you’re dealing with. This is especially apparent with franchises. There have been many cases where we’ve dealt with clients that had no idea who the local entity was. You can’t just go around and sue every restaurant with the same name, as each might have the same brand, but they don’t necessarily have the same legal entity governing them.

A great way to find out who they are is to go to the secretary of state to get that info. However, you’re going to need to make sure you know what LLC their apart of. Otherwise, you’re going to pull up more than a hundred different DBAs from different businesses with the same name, in various counties.

A great asset to figuring out who you’re dealing with is to have a credit application signed. It holds all the information you’re going to need if you ever need to pursue a case against a former client. Alongside the secretary of state, the credit application can help seal the deal when it comes to ensuring you’ve got the right tools to win a case.

What Are Half Related Entities and How Do They Affect You?

Half related entities can be summed up as various companies or groups working under a single banner. These can be anything from corporations with their various divisions or LLCs with their various companies. They can be tricky to work with as they can easily exploit the wording in your contracts with them. For example, you’re presenting candidates to ABC company who has XYZ company as one of its divisions. XYZ company can scoop up those clients from under your nose and neither of the companies are obliged to pay you a fee if you don’t use specific wording in your contract.

You can avoid this by having the words “related entities” or “affiliates” in your contracts. This legally binds the company you’re dealing with to pay a fee if any of their divisions or affiliates hire your candidates.

With many companies going under without prior notice, leaving their former partners with a financial burden and a net loss, it can be a challenge recognizing the initial signs. However, with the right knowledge, tools, and awareness you’ll be able to effectively safeguard your interests and assets.

To learn more about AER resources related to back door hires, visit or call Wilson Cole at 800-452-5287, extension 6578.


-The trick is to catch bankruptcy before it gets to that point

-If you’re a staffing firm, get a credit application signed because you need to realize you’re not providing staffing, you’re loaning money.