I'm confused about why LAOP would do this without her own attorney to begin with.
Honestly this story is so baffling that all I can do is repeat one of the top questions. She accepted all the liability and didn't divert the billing to herself? I don't understand this at all.
I'm really confused about buying a home-based daycare. Why buy it out if the parents are loyal to you and not the business as described? Did the seller move out and LAOP move in? Can a home-based daycare even legally provide services to enough children to merit having an employee? SO MANY QUESTIONS
Yeah, I think something is missing from the story. Like this is a relative or an ex who promised to eventually turn over the business to OOP and then for some reason...didn't.
(From their previous post)
Daycare license was originally in Seller’s name. About a year ago, I was added as a co-licensee. • Seller moved out almost 2 years ago but kept their S-Corp active on paper while I was running the day-to-day.
So OOP moved into the house and started running the daycare, initially living there with the Seller? And then the Seller moved out of the house - which means OOP was illegally running the daycare with no licensee on premises for a year.
Anyway, 12 kids can fit in this house (plus employees and at least 1-2 live in caretakers)? Dang.
Agreed. I think this only really makes sense if this is a relative, or an ex, or maybe even an ex-roommate? I'm leaning towards a relative, because LAOP mentions in a comment that the Seller has retired. It would explain why they were (presumably) living together, and why LAOP just trusted that everything would be done/transferred over eventually.
And then the Seller moved out of the house - which means OOP was illegally running the daycare with no licensee on premises for a year.
This was what really stood out to me. There's no way it's legal to run a home-based daycare under someone else's name. I wonder what other really dumb assumptions LAOP is working under... I bet whatever "agreement" she has with the seller is just rife with irregularities.
Based on some of their other comments, my personal theory is OOP had a handshake agreement to buy out the business in interest free installments. Then their mom or whoever decided to keep the tuition as either the payment, or guarantee of payment. OOP had enough in savings for running costs for a few months, maybe that was supposed to go to the seller (or the seller thought it should)? And then the seller retroactively tried to get an official contract and an aggro attorney involved.
Now was this because of greed, irresponsibility, or general incompetence on one or both of their parts? Who knows! But that many kids without a licensee there for a year was definitely shady!
I know multiple families that have daycares in newer (larger) 2-story houses with an open layout on the bottom. These houses often have some kind of family room upstairs too. So the family lives upstairs and the daycare is downstairs. Often, the kids at these daycares are babies and toddlers (sometimes preschoolers, but kids usually leave for after school programs starting in kindergarten) so they don't take up much room.
The threshold for needing a 2nd care giver for babies and young toddlers is usually quite low, so it's common for a home-based daycares to have at least one employee.
I always assume business owners who post in that sub are so used to doing business in weird, under-the-table ways that they don't know how real businesses work or how non-shady people operate. I know someone whose entire family is like this. Their entire goal in life is to not pay taxes, so they use large amounts of cash and never involve attorneys in their transactions, even when there are tens or hundreds of thousands of dollars at stake. Everything's a handshake deal with them. One of them even quit his job because his boss started taking taxes out of his paycheck. My first thought when I hear about one their schemes is always, "Wouldn't it be easier to just pay the money?"
I always assume business owners who post in that sub are so used to doing business in weird, under-the-table ways that they don't know how real businesses work or how non-shady people operate.
I don't even know if it's necessarily nefarious, but I agree, I think most business owners who post in LA have no idea how real businesses work and are used to doing business in....whatever weird way they came up with.
And, you know, in fairness to them, it's not like it's required to take a course or prove competency in your field/in running a business before you're able to open a business. I know a lot of small business owners who basically just fell into it and, I'm sure, probably have some bonkers business practices that would send LA into a tailspin.
This is so weird. Of course it's fraud, but the way OP says 'the money just went in her account instead of mine' as if nobody is responsible for that? And then kept providing services to customers who effectively weren't paying her because their payment had gone to a criminal instead?
Yeah, op is making it sound like they spent 40k to not disrupt anyone’s childcare situation in a business they don’t own. Which is awfully nice of them but probably not a good financial decision.
I don't think they spent anything. The 40K is tuition, probably automatic charges that the old owner should have turned over but didn't.
It looks like OP is still trying to make the business work. They might be able to if they're willing to take the hit for the $46K, tell the parents to change their payment to her, and tell everybody their deposits are just gone. The sale never went through, so the old business' liabilities never transferred.
Based on a comment, the previous owner communicated that she would change the destination account in the payment portal already in use by their customers, as part of the transfer in ownership.
Then she either failed to or chose not to, and is also explicitly keeping the money.
I’m sure part of buying a business is to either get control of corporate accounts or have some kind of orderly transition for transferring payments to a new account.
I've been offered the opportunity to invest in a friend's business, but when the accountant I paid to audit the books came back and said "I dunno, all the numbers are there but either there's something fishy or the business is barely viable" I decided not to. But the process would very much have involved my lawyer talking to his lawyer and a great deal of straight talking from the friend.
(FWIW I think 'barely viable' is accurate, the friend has priorities other than making money. Why work when you've made enough to live on this month and there's surfing to do)
"Someone's diverted almost $50k from my business. No, I didn't have an attorney help me start this business where I took on all the liabilities but none of the profits. What do I do to get out of this mess, besides hire a lawyer who will want to be paid?"
I know this seems greedy of me but making sure I'm actually receiving the payments from services rendered would be tip-top of my priority list when taking over a business.
Yeah that's like. Day one. Not greedy at all. The whole point of a business is to provide goods or services in exchange for money. If I'm not getting the money, then what am I doing?
One thing that stood out to me was this was a 0% interest installment plan with no specified end/closing date. So the seller owns assets, and OP is using them, but the seller doesn’t have to get paid for them on any specific timetable and they get the same amount of money whether OP pays them back now or in 10 years. Like, that is objectively a bad deal for the seller. I can totally see why their attorney would say there needs to at least be interest on the balance, because otherwise OP has no incentive to actually complete the deal. I also noticed it’s been 2 years already and the seller sold some assets, so I’m thinking OP isn’t making payments quickly enough for the seller and that’s why they’re selling assets and keeping payments (which would suggest OP owes at least $46k more, that they’ve told us they don’t have). OP also made it sound like they were ready for closing until the seller backed out but over their multiple posts on this matter they’ve never said they made all the installment payments or were ready to make the final payments. And apparently they’re still so deep in debt from the down payment 2 years ago that they can’t even get a personal loan or credit card to cover a lawyer. And why would the seller wait until OP had made or was ready to make all payments to get a lawyer involved? Makes a lot more sense that OP wasn’t being quick enough on their payments and that’s why the seller finally brought an attorney into this after 2 years (because they realized what a bad deal this was for them).
Here’s the update, and honestly I’m exhausted and scared about what happens next.
I entered into a written purchase agreement to buy an existing licensed home daycare from the prior owner. Based on that agreement and her representations, I formed my own LLC, took over day-to-day operations, staff, parents, rent, utilities, food, licensing compliance — everything. The daycare never closed. Children were continuously cared for. Parents believed they were paying for ongoing care under the new operation.
Then the prior owner backed out.
She refused to complete closing, refused to transfer assets or deposits, and cut off access to the business account. Despite no longer operating the daycare or residing at the licensed location, tuition payments made by parents — which everyone understood were for continued care under my LLC — continued to be routed to her bank account.
She kept the money.
We’re talking under $40,000 in tuition plus about $6,000 in refundable parent security deposits that parents are owed. Meanwhile, I still had to pay payroll, food, rent, insurance, utilities, and keep the daycare compliant so families weren’t left without childcare overnight.
Parents are (rightfully) upset, and those who's kids are moving on to pre-k want their deposit refunds — but I never received any of the money in the first place.
I’ve tried to resolve this without litigation. I’ve tried to get counsel. I’ve documented everything. But here’s the reality:
• I’m already ~$46,000 in the hole
• Attorneys want large retainers
• I’m running a daycare on razor-thin margins
• If I divert operating cash to legal fees, the daycare WILL collapse
• If the daycare collapses, families lose care, staff lose jobs, I lose everything
I feel trapped in a situation where the party holding the money can afford to stall, while the person actually providing the service is drowning.
Are contingency or low-cost civil options realistic in cases involving conversion/misappropriation?
I did everything by the book. I acted in good faith. And right now it feels like doing the “right” thing is what put me at the most risk.
Cat fact: cats might forget to transfer funds, but more often out of laziness than malice.
I saw something similar a few days ago! That OP had posted about their flight being cancelled and included a photo of the very uncomfortable looking airport chair that was going to be their bed for the night. The ad underneath said “You spend a third of your life sleeping, so why not spend it as comfortably as possible on one of our mattresses?”.
NAL but was once in a vaguely similar situation regarding a film production services company I bought, after which the seller absconded with half the equipment and the business’ current account, then kept mailing out rental invoices to what were now my customers, who of course mailed him cheques. Took a long time to straighten out, with commensurate losses of money, sleep and stomach lining.
This may be outright criminal fraud (seller pretending to still provide services in order to defraud former clients) or it may be promissory estoppel (seller’s promises to sell & to hand over the biz cannot be reneged upon, and is enforceable by law).
Anyway - official Lawyer Territory. Despite pleading poverty, OP can’t afford to not engage a lawyer tout de suite.
I'm confused about why LAOP would do this without her own attorney to begin with.
Honestly this story is so baffling that all I can do is repeat one of the top questions. She accepted all the liability and didn't divert the billing to herself? I don't understand this at all.
I'm really confused about buying a home-based daycare. Why buy it out if the parents are loyal to you and not the business as described? Did the seller move out and LAOP move in? Can a home-based daycare even legally provide services to enough children to merit having an employee? SO MANY QUESTIONS
Yeah, I think something is missing from the story. Like this is a relative or an ex who promised to eventually turn over the business to OOP and then for some reason...didn't.
(From their previous post)
So OOP moved into the house and started running the daycare, initially living there with the Seller? And then the Seller moved out of the house - which means OOP was illegally running the daycare with no licensee on premises for a year.
Anyway, 12 kids can fit in this house (plus employees and at least 1-2 live in caretakers)? Dang.
Agreed. I think this only really makes sense if this is a relative, or an ex, or maybe even an ex-roommate? I'm leaning towards a relative, because LAOP mentions in a comment that the Seller has retired. It would explain why they were (presumably) living together, and why LAOP just trusted that everything would be done/transferred over eventually.
This was what really stood out to me. There's no way it's legal to run a home-based daycare under someone else's name. I wonder what other really dumb assumptions LAOP is working under... I bet whatever "agreement" she has with the seller is just rife with irregularities.
Based on some of their other comments, my personal theory is OOP had a handshake agreement to buy out the business in interest free installments. Then their mom or whoever decided to keep the tuition as either the payment, or guarantee of payment. OOP had enough in savings for running costs for a few months, maybe that was supposed to go to the seller (or the seller thought it should)? And then the seller retroactively tried to get an official contract and an aggro attorney involved.
Now was this because of greed, irresponsibility, or general incompetence on one or both of their parts? Who knows! But that many kids without a licensee there for a year was definitely shady!
I know multiple families that have daycares in newer (larger) 2-story houses with an open layout on the bottom. These houses often have some kind of family room upstairs too. So the family lives upstairs and the daycare is downstairs. Often, the kids at these daycares are babies and toddlers (sometimes preschoolers, but kids usually leave for after school programs starting in kindergarten) so they don't take up much room.
The threshold for needing a 2nd care giver for babies and young toddlers is usually quite low, so it's common for a home-based daycares to have at least one employee.
I always assume business owners who post in that sub are so used to doing business in weird, under-the-table ways that they don't know how real businesses work or how non-shady people operate. I know someone whose entire family is like this. Their entire goal in life is to not pay taxes, so they use large amounts of cash and never involve attorneys in their transactions, even when there are tens or hundreds of thousands of dollars at stake. Everything's a handshake deal with them. One of them even quit his job because his boss started taking taxes out of his paycheck. My first thought when I hear about one their schemes is always, "Wouldn't it be easier to just pay the money?"
I don't even know if it's necessarily nefarious, but I agree, I think most business owners who post in LA have no idea how real businesses work and are used to doing business in....whatever weird way they came up with.
And, you know, in fairness to them, it's not like it's required to take a course or prove competency in your field/in running a business before you're able to open a business. I know a lot of small business owners who basically just fell into it and, I'm sure, probably have some bonkers business practices that would send LA into a tailspin.
This is so weird. Of course it's fraud, but the way OP says 'the money just went in her account instead of mine' as if nobody is responsible for that? And then kept providing services to customers who effectively weren't paying her because their payment had gone to a criminal instead?
Yeah, op is making it sound like they spent 40k to not disrupt anyone’s childcare situation in a business they don’t own. Which is awfully nice of them but probably not a good financial decision.
I don't think they spent anything. The 40K is tuition, probably automatic charges that the old owner should have turned over but didn't.
It looks like OP is still trying to make the business work. They might be able to if they're willing to take the hit for the $46K, tell the parents to change their payment to her, and tell everybody their deposits are just gone. The sale never went through, so the old business' liabilities never transferred.
Based on a comment, the previous owner communicated that she would change the destination account in the payment portal already in use by their customers, as part of the transfer in ownership.
Then she either failed to or chose not to, and is also explicitly keeping the money.
It’s become apparent the seller isn’t acting in good faith.
Did you, though?
I've never bought a business, but I feel like I wouldn't do it this way.
I’m sure part of buying a business is to either get control of corporate accounts or have some kind of orderly transition for transferring payments to a new account.
It wouldn’t. You’d never start “operating” the business until the deal was closed, which would include transferring all of the assets.
... the book written by the previous owner.
I've been offered the opportunity to invest in a friend's business, but when the accountant I paid to audit the books came back and said "I dunno, all the numbers are there but either there's something fishy or the business is barely viable" I decided not to. But the process would very much have involved my lawyer talking to his lawyer and a great deal of straight talking from the friend.
(FWIW I think 'barely viable' is accurate, the friend has priorities other than making money. Why work when you've made enough to live on this month and there's surfing to do)
The book that was written by a user of the business in crayon?
"Someone's diverted almost $50k from my business. No, I didn't have an attorney help me start this business where I took on all the liabilities but none of the profits. What do I do to get out of this mess, besides hire a lawyer who will want to be paid?"
I guess keep going on and hope for the best!
I know this seems greedy of me but making sure I'm actually receiving the payments from services rendered would be tip-top of my priority list when taking over a business.
Yeah that's like. Day one. Not greedy at all. The whole point of a business is to provide goods or services in exchange for money. If I'm not getting the money, then what am I doing?
One thing that stood out to me was this was a 0% interest installment plan with no specified end/closing date. So the seller owns assets, and OP is using them, but the seller doesn’t have to get paid for them on any specific timetable and they get the same amount of money whether OP pays them back now or in 10 years. Like, that is objectively a bad deal for the seller. I can totally see why their attorney would say there needs to at least be interest on the balance, because otherwise OP has no incentive to actually complete the deal. I also noticed it’s been 2 years already and the seller sold some assets, so I’m thinking OP isn’t making payments quickly enough for the seller and that’s why they’re selling assets and keeping payments (which would suggest OP owes at least $46k more, that they’ve told us they don’t have). OP also made it sound like they were ready for closing until the seller backed out but over their multiple posts on this matter they’ve never said they made all the installment payments or were ready to make the final payments. And apparently they’re still so deep in debt from the down payment 2 years ago that they can’t even get a personal loan or credit card to cover a lawyer. And why would the seller wait until OP had made or was ready to make all payments to get a lawyer involved? Makes a lot more sense that OP wasn’t being quick enough on their payments and that’s why the seller finally brought an attorney into this after 2 years (because they realized what a bad deal this was for them).
What margins?! You ain't getting none of the money. Why would someone take on all the liabilities without securing the bank account first?
Child Finance Bot
Update: Former owner backed out, tuition intended for my daycare went to her account, now I’m ~$46k in the hole and struggling to survive
Cat fact: cats might forget to transfer funds, but more often out of laziness than malice.
I hate it when Reddit just decides to ignore its own markdown code and not make hyperlinks work.
I noticed that this morning and thought it was a me problem
No it's definitely a thing that happens periodically, I've been tearing my hair out about it for probably two years now.
The ad placement.
"I'm screwed and don't know what to do" -LAOP
Ad underneath "Thats what you get with Legal zoom" 😬
Almost makes me wish I didn't have ads blocked.
Almost.
I saw something similar a few days ago! That OP had posted about their flight being cancelled and included a photo of the very uncomfortable looking airport chair that was going to be their bed for the night. The ad underneath said “You spend a third of your life sleeping, so why not spend it as comfortably as possible on one of our mattresses?”.
NAL but was once in a vaguely similar situation regarding a film production services company I bought, after which the seller absconded with half the equipment and the business’ current account, then kept mailing out rental invoices to what were now my customers, who of course mailed him cheques. Took a long time to straighten out, with commensurate losses of money, sleep and stomach lining.
This may be outright criminal fraud (seller pretending to still provide services in order to defraud former clients) or it may be promissory estoppel (seller’s promises to sell & to hand over the biz cannot be reneged upon, and is enforceable by law).
Anyway - official Lawyer Territory. Despite pleading poverty, OP can’t afford to not engage a lawyer tout de suite.
Closing was not completed. Does LAOP even own the daycare? It looks more like she is volunteering her own money to run it
Promissory estoppel.
I’m not a lawyer or even a particularly smart person, but wouldn’t the parents who paid the tuition also be able to take action here?
I'd think so at least as far as refunding the deposits go.