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Can we talk about C Corps for a minute?

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  • Can we talk about C Corps for a minute?

    I see a lot of folks on here that own a small business and the general consenus seems to be that the biz is a done issue once you file.

    Either the TT is going to chomp on your A/R, and sell your assets...or the mainstream advice seems to be close/dissolve the biz prior to or as part of filing.

    I agree that path makes sense for a sole pro, an LLC, a partnership or an S corp....but what about us crazy people in C corps?

    The way I understand it (and the way my attorney and accountant explained it to me)...is that all I own (and thus, the only thing subject to my BK estate) is shares in a corporation. I do not own a business. The corporation that is an entity unto itself owns the business. My shares in the corp are no different from someone else that owns shares of IBM (trustee is not looking at IBM's A/R if you have stock in the company...they're looking at the value of the shares).

    My shares (thank my lucky stars) are worth bupkis. The corp is technically insolvent.......it owes taxes up the ying yang....even if the company sold all its assets tomorrow for FMV...there would not be enough to pay the tax bill. Let alone allow a distribution upon dissolution to the shareholder (me)...and it's my understanding that the corp's debts take precedance over a distribution to the shareholders......meaning that if the TT decided to take the company - he'd get nothing but a pile of tax debt.

    That's my attorney's position as well. So he's figuring that the TT is going to take one look at the swamp that is the corporation and refuse to touch it with a ten foot pole.

    The good news here (for me) is that the corp has struck deals with both the Infernal Revenue Service (pending) and the state tax authorities (completed)....and as long as the corporation honors those agreements ... they're not going to scream.....(or levy for that matter).

    The corp can do that - and continue to pay it's sole employee (again, me) enough to cover the mortgage, utilities and food.

    Opinions and thoughts on this? Quite frankly, if the TT decides he wants the business, I'm thinking that I can just quit (as an employee), turn the whole sorry mess over to him, and get myself a greeter job at WalMart.
    Moving ahead with my fresh start!
    Ch 7 Discharge: 12/14/2009
    TT Report of No Dist! 03/31/2010
    Case CLOSED!!!: 04/28/2010

  • #2
    All those other types of business are "entities" unto the themselves as well.

    The trustee does inherit your rights as a shareholder. In the "large" corporate context, its a moot point because no single shareholder has any meaningful rights, but in a closely held business; the trustee can step into the rights of the shareholder. However, if the biz is insolvent or has no assets, then its a moot point, but if the biz has assets, the trustee does get those rights. Keep in mind, the S-Corp/C-Corp designation is merely a tax classification, a corporation is still a corporation.

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    • #3
      Originally posted by HHM View Post
      All those other types of business are "entities" unto the themselves as well.

      The trustee does inherit your rights as a shareholder. In the "large" corporate context, its a moot point because no single shareholder has any meaningful rights, but in a closely held business; the trustee can step into the rights of the shareholder. However, if the biz is insolvent or has no assets, then its a moot point, but if the biz has assets, the trustee does get those rights. Keep in mind, the S-Corp/C-Corp designation is merely a tax classification, a corporation is still a corporation.

      What happens to the loans on this C-corp with personal quarantee of the owner? What if there are no assets for the c-corp? Would the owner still file Ch7 and show these loans too.

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      • #4
        Originally posted by JThorn View Post
        What happens to the loans on this C-corp with personal quarantee of the owner? What if there are no assets for the c-corp? Would the owner still file Ch7 and show these loans too.
        My brother has contacted 3 attorneys regarding the closure of his C-Corp. He is the only officer (president). He personally guaranteed several credit apps for the business.

        The attorneys informed him that if you/the owner/officer personally guaranteed any loans/credit for the business, you would need to list that loan/credit on your personal BK schedules because the creditor could come/look after you to pay the debt that you personally guaranteed.

        By listing that debt then you personally are afforded the BK protection.

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        • #5
          What is the largest amount of debt that someone has seen in filing. Including personal and corp debt (C, S, LLC or Sole Prop)?

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