How can I pursue a non-responsive company for tax docs and potentially money back?

Question

In late 2021 I invested in a Qualified Opportunity Zone (QoZ) that closely aligned with my values. This year, I haven't heard from them for various requests of mine (typically before April 2022 and even after, for tax docs for the investment).

I called the founder, the number listed on their site, emailed them, etc. Curious to see what may be going on, I looked up news articles and see that they are caught up in some lawsuits/small claims etc.

(As an investor I would be upset to lose money that I earmarked for a cause that I believed in but that's the risk with investments anyway.)

More importantly:

1. My tax preparer needs the EIN or Tax ID to be able to complete filing taxes (we already applied for an extension). How can I find this info if they don't respond?

2. In the worst case if they shut shop, then how might I go about getting my money back?

The investment was for a SAFE (Simple Agreement for Future Equity). I have the signed SAFE with me. The LLC was created for this purpose to be able to qualify for a tax deferral (given it is a QoZ).

Answer 1

In the worst case if they shut shop, then how might I go about getting my money back?

It is unlikely that you can. A SAFE is not a loan (and for that matter isn't even a share in the company) and doesn't create an enforceable contractual right to get your money back. If you make an equity investment and the company loses money and goes out of business, you lose everything you invested.

If the promoter made false representations that induced you to invest, or actively concealed material facts about the investment, you might be able to sue the promoter for securities fraud under federal regulation 10b-5, or under a state securities law, or under a common law fraud theory.

You could also sue to issuer of the investment (i.e. the company) but that would usually be futile because the company is broke and hence judgment proof.

State or federal securities regulators or a local district attorney or state attorney-general might pursue the case in lieu of a private civil action by you, but getting them to take action is often quite difficult.

But, if your investment wasn't induced by fraud and instead the management of the company simply made bad decisions that caused the company to fail, you have no remedy.

The investment was for a SAFE (Simple Agreement for Future Equity). I have the signed SAFE with me.

This is a very unusual way for a QoZ to be structured, which adds to the sense that this may have been a shady venture.

Answer 2

Q1: How can I find this info?

This article, by nerdwallet (with whom I have no affiliation) offers these suggestions:

1. Ask the company

Someone in the payroll or accounting department should know the company's tax ID.

2. Search SEC filings

If the company is publicly traded, look at the Securities and Exchange Commission's website and enter the company's name. The SEC filings should contain the business tax ID number (listed as "IRS No.").

3. Inquire with a credit bureau

Credit bureaus allow you to purchase your own business credit report or view another company's business credit report for a fee, but these reports won't always show the company's EIN. Confirm that the report you're considering will contain the EIN before you order it.

4. Use a paid EIN database

Another option is to search a commercial EIN database, which will charge a fee for access to company EINs. Some databases even link EINs to other information, such as company size and industry. This can help you find new prospects.

5. Use Melissa Database for nonprofits

The Melissa Database provides free federal tax ID lookup for nonprofit organizations.

And it concludes with:

If you have a legitimate need to find the EIN for another business, then you can use one of these options to look up the number. Just be sure to keep your own EIN secure. Only share the number with a limited subset of people—lenders, prospective suppliers, bankers, etc. You should guard your business's EIN just like you would guard your social security number.

As for Q:2, there are too many variables to offer a definite answer. e g. it may depend on why they "shut shop" such as incompetence vs fraud, or some other reason. And whether any investments were underwritten by insurance, or protected by guarantee etc, etc... But for a more considered answer see ohwilleke's reply.