Location: Orange County, CA
I posted previously about trying to purchase and take over an existing home daycare, linked here.
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.
There may be an element of fraud here too. If she continued to accept tuition payments without providing services. I’d at least test the waters with a police report. This would be wire fraud if it were determined to be a fraud so local police AND feds could get involved.
If nothing else, a couple calls from law enforcement could get that money paid quickly.
This was my thought as well. Just because money shows up in your account doesn't necessarily mean its yours.
Another option would be to have the payment processor reverse those charges, pull the money out, and re-process them. Assuming she didn't move the money out of their account.
This is federal wire fraud
Cop here, you are correct this is fraud.
OP, make a police report with your local police department. Contact your district attorneys office and ask to speak with the economic crimes division (could be called a variation of that name but they specialize in prosecuting these types of cases). They will be able to help guide you in this process.
Good luck!
Thanks for this. Most situations like this that pop up on these subs are situations where the redditor is most likely going to get told by police it’s a civil matter or the money is too small for law enforcement to really care. In this case the failed transfer of the business and its related assets is going to be a civil matter but running off with the continued tuition payments is going to be a fraud and if it’s pushing $50k I would imagine that’s way past the threshold point to get you all are interested in this.
I’m hoping for OPs sake that the best case scenario which is that the previous owner still has the money and pays it after a come to Jesus moment after the first voicemail from police. By my best guess is that money has all been lost at Pechanga casino by now.
Second this- organize a timeline with links to your docs and screenshots (google drive and Google Sheets, put links to the files in the sheet with a date and brief description of each relevant document/communication/screenshot)
Contact local pd, oc sheriffs, and fbi. Hopefully one of the 3 will pick up the case.
Also contact the legal aid society.
Lastly share the timeline you make with the parents who paid. They need to contact law enforcement as well.
The faster you move on having the timeline organized the better. Because it can/will be shared with all the stakeholders listed above.
not embezzlement?
Definitely file a police report!
From your first post;
From this post;
I’m confused about what exactly you did here. It looks like you’ve taken over all liabilities but didn’t move the billing from her s-corp to your LLC?
You have a signed purchase agreement so your position is strong but you’re going to have to bite the bullet and get an attorney to resolve this.
Sorry about the confusion; I can clarify a bit.
When the previous owner notified everyone of her retirement, the parents signed new contracts with me. I was employed at the previous daycare at the time, and the goal was to avoid creating difficulties for the parents by having them use the same app for payment and communication that we use.
The parents made their payments in good faith, expecting them to be transferred to my business. And that was the plan; I have documented communication from the previous owner clearly stating that. At one point, she even asked for my new business account number, and right after I provided it, she said her attorney advised her to hold onto it until the altered, unapproved agreement was finalized.
The main issue is that there are no funds for retainers and attorney fees until after the money is returned. I took out a personal loan to pay the deposit for the purchase, and because of this situation, I've been in the red from the start.
The very first thing you need to do is move billing under your own LLC. You already use a payment processor so this should have minimal inconvenience to your customers.
Since you’re tight on funds, I would first try having a lawyer draft you a demand letter. That alone may be enough to scare her into releasing funds and should only cost ~$500.
If that doesn’t work, you’re going to have to find an attorney willing to work on contingency or manage to scrape together enough for a retainer.
Why did they make payments to the old S Corp if they had a contract with you?
Sounds like she had access to the account for the previous company and got cut off. So she would have had access to transfer funds to the new business entity with minimal fuss until the billing can be redirected.
I don’t understand the timeline here. You say you took over operations and were paying rent, etc. Did you have access to the business account at this time? Or was she just sending you the money? Or were you paying for the costs yourself?
Why haven’t you contacted the police? At minimum this is fraud.
Both you and I know the solution to this. You’re 46k in a hole, Reddit isn’t privy to your contract. Bite the bullet and get an attorney like…yesterday
Hate to agree but I had a deal exactly like this. Some things I controlled some I didnt. Luckily I had most cash coming to me to float and also make a decent amount. Very lucky I didn’t come out of the hole.
You need an attorney to fight this.
I agree with you completely, but the issue is practical, not theoretical.
I'm already $46k in the hole because funds meant for the business never arrived (not to mention the personal loan I took out just to stay afloat this long). Attorneys say the case is solid but quote retainers that could bankrupt the daycare before filing.
Winning later won't matter if the business doesn’t survive.
Not an attorney The options you are asking for might exist. Try legal aid societies in the county. Specifically search for attorneys that offer different fee agreements. Your local county courthouse might also be able to give you referrals for attorneys that can help. Lead with you have no money/finances are tight. When you do a broad attorney search with a referral service, the attorneys you are matched with might be limited to firms that want larger retainers or take on larger work. Your community might be another option. Talk to people you know and see if you can find an attorney in the community that might be willing to help using terms that work for you. Going through the front door hasn’t worked, but a side door might exist. Good luck.
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I’ve called just about every pro bono and community legal aid number in Orange County at this point. Nothing panned out beyond a few free consultations, which is how I confirmed the case is solid but the retainers aren’t just unrealistic, but financially impossible.
I actually hadn’t thought about law school clinics though, so thank you for that! After reading your comment, I left voicemails and sent emails to both UCI Law and Chapman Law before replying here. I’m hoping one of them at least has resources or can point me in a better direction.
I appreciate the empathy too — this has been a rough spot to be in, and I’m trying to keep the business afloat while still doing things the right way.
r/mysteriousdownvoting
It’s been 75 days since your last post that you linked to this, what do you mean you “I’ve tried to get counsel?” you either do or don’t have counsel. “Trying” isn’t a thing in this type of law.
Get legal counsel, it will be cheaper and protect your business in the long run. No one on Reddit will be able to provide the insight that you need without knowing the contracts. Even if you post them, DO NOT take Reddit advise from strangers as true. Get. An. Attorney.
I completely understand what you’re saying, and I agree 100%.
When I say I’ve “tried to get counsel,” I mean I’ve had multiple consultations through the Attorney Search Network and the Public Law Center. Every attorney I’ve talked to has said the case itself is solid — the issue is cost, not merit.
I started this business already about $46k in the hole because the tuition that was supposed to fund operations never reached the business. Since then, I’ve been struggling to pay payroll, rent, food, insurance, and keep the daycare compliant so families aren’t left without childcare. There just isn’t a large retainer available without risking the daycare before anything is even filed. It’s not that I don’t want or don’t understand the need for an attorney.
I’m stuck in that gap where I have a legitimate claim but can’t afford to pay a traditional retainer upfront. That’s why I’m specifically asking about pro bono, contingency, or deferred-payment options — not trying to litigate this on Reddit.
If you know of attorneys or resources that work that way, I’d genuinely appreciate it. If not, I still understand what you’re saying.
Unfortunately there's no other solution or workaround here. Attorneys (understandably) don't want to take on a ton of work without a guarantee that they'll get paid for it.
Really all you can do is talk to a bunch of attorneys and see if you can find one that will accept a payment plan, or a lower retainer, or something that you can afford.
I can understand that and I’m not trying to talk crap or down. I just want you to understand that to get the back payments of the previous owners you’re going to need an attorney. I understand you’re already in the hole, that friggin stinks.
IAL, but you need to get an attorney who will work for the eventual payout (easier said than done) yes you deserve all the money and I agree but if you have to give up a % of the future settlement that’s worth more than being 46k+ in debt that accrues (in my mind because the money is already sunk on your end given the debt)
It sounds like OP is well aware they need an attorney, but cannot afford one.
That’s why I was understanding and acknowledged their situation and offered the idea of an attorney working for a percentage of the settlement. Not everyone can afford an attorney, finding an attorney working on pro bono is difficult to find regardless. Finding an attorney who sees a case as an easy win and will work for a % of the settlement seems like a viable avenue.
The case might be an "easy win" on the merits, but collecting is likely to be difficult or impossible. Contingency arrangements are viable against reputable or established companies that will pay a judgment, not against individuals or small companies that are actively avoiding payment.
What did the PLC say? Did they turn you away?
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There is no solution for you other than get a lawyer, you are already several MONTHS behind on this.
What she did is illegal!
Unfortunately, it’s a scam I’ve seen before. My ex-boss/we co-ran a school together entered into a similar arrangement with someone I believed was pulling this off and the lady moved on to a new victim when I stated I was concerned about assets before signed contracts. She then skipped the state and opened up a new daycare in a different state. Such gross behavior.
I would start with contacting your payments processor and getting everything set up in a way that allows you to collect tuition and stops the flow to her bank account. You have the parent contracts and the LLC, you don’t need her permission to do that. If families have autopay set up, they’ll need to cancel that money going to her on their end.
I would clearly communicate with your parents what has happened and your plan for 1-resolution and 2-how you’re to ensure that their money and children are safe (parents care a lot more about that then backend drama, so make sure the drama stays away from the kids).
Also, file a police report and contact your DA with as much evidence as you can provide on the front end. I would also see if you can find some legal aid in the area. You could also sign up for something like Legal Shield to get some help.
I’m so sorry this has happened to you.
Apologies if this is out of place, but couldnt OP file this suit on her own behalf in District Court?in my city, there are people at the court who help with this kind of thing. Is it possible for OP to do the legwork and have a consultation by an attorney willing to check her work?
In theory, yes, anyone willing to pay the filing fee can file a lawsuit on their own. In practice, it's a hell of a bad idea. OP has $46,000 at risk and she may only get one bite at the apple. Also, from the post it isn't hard to imagine that OP is overworked and completely stressed out. You can't draft a summons and complaint in that state, not when you've never written a legal pleading before.
OP needs to find a lawyer willing to work with her. Someone from church, the PTA, or the Rotary club. Friend of the family, friend of a friend, whatever. Just keep searching and putting out feelers in her personal and professional networks until the right person hears about her case. With $46,000 on the line you need a professional.
This sounds like theft. Call the police. Press charges.
NAL but why in the world did you take over before it was legally yours?