I am merely asking to ask, not expecting anyone here to know; How is that not tracked & well linked in preventing the flyby night business from doing such thing?
I would expect at a minimum for a Soc Sec # along with tax ID to be tied to anyone opening such a business.
I think lots of other states regulate this a lot tighter by requiring people like "home builders" to be licensed, registered, meet minimum qualifications and insurance.
Texas in some ways is still the "wild west".
Lenders will want to see home builders with some financial records / track records. And some "communities" will only let certain home builders in after they complete financial audit. But if you an scrape together a few hundred K (even unsecured loans) you can build a home.
But to answer your question, these are legitimate businesses (from an entity standpoint) with a tax ID. But what's to keep the owner/controlling agent from taking business checks and transferring them to personal accounts? Or better yet, use business funds to purchase property for relatives - as 1st homes are protected asset classes in some cases. I've seen all of that happen.
And in the end, if the money is "spent" and the business (or individual) becomes insolvent, the best attorney in the world cannot extract water from a rock.
And assets? Their trucks are leased, their equipment (if they own any) is leased - and probably behind on payments. Nothing to recover. GC here is largely a management / manager business where the money you make is a margin on other trades.
And the trades will keep working if they're promised that their last bill will be paid as soon as they complete the next bill.