With the same two owners, LMN Entity has been added to the left side of page as a related entity to ABC Entity and XYZ Entity. ABC Entity and LMN Entity have entered into a service agreement for LMN Entity to provide services to ABC Entity. LMN Entity contracts with the employees and vendors, (including independent contractors), which constitute the bulk of LMN Entity’s liabilities. The service agreement with ABC Entity provides the funds to meet its obligation to employees and vendors.

LMN Entity doesn’t have funding from loans, doesn’t hold equipment and doesn’t retain much cash beyond their contractual obligations, which means that LMN Entity has very few assets. In a dispute–most likely to be tied to their contracts with employees and vendors–bankruptcy would be an attractive option for LMN Entity.

While dissolving LMN Entity would cancel the employment agreements and vendors contracts, many employment agreements can be assignable, (which means that prior to dissolving, the employment agreements could be transferred to another company), and LMN Entity could just recontract with vendors. Like a hermit crab moving from one shell to another, the owners could dissolve LMN Entity, establish a new entity and enter into a new service agreement with the new entity.