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how soon to start new S corp?

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  • how soon to start new S corp?

    I am a self employed consultant who will be filing non-consumer bk7 because of failed investment real estate.

    I currently receive income through my S corp and pay myself a paycheck out of it. As the S corp will become property of the trustee during the bk, I do not want to put a lot of $$ in it.

    Because the company has no real value (it consists of me and a checking account) or assets and also has no name recognition, I can start a new one and continue to put earnings into it.

    At my first meeting, my attorney suggested letting this S corp starve and starting a new one. As I understand it, the S corp is an asset of mine on day of filing but the day of filing is just a snapshot.

    My question is how soon can I incorporate another S corp and keep it out of the bk?
    Can I incorporate after I file or do I have to wait until after the 341?

    If I have to wait until after the 341, how do I deposit the accounts receivable and pay myself income in the old one?

    Thanks in advance for your help

    (I realized this might be better served to be in a pre-discharge forum so I have also posted the question in the small business forum, hope this is not a problem)

  • #2
    Originally posted by porkchopcash View Post

    (I realized this might be better served to be in a pre-discharge forum so I have also posted the question in the small business forum, hope this is not a problem)
    Actually, you should never make duplicate threads. The powers that be probably won't be smiling favorably on this. I'll answer on the other thread......
    All information contained in this post is for informational and amusement purposes only.
    Bankruptcy is a process, not an event.......

    Comment


    • #3
      You can incorporate anytime that you choose to. With that being said however, if you open a new one before filing for bk, it too becomes part of the estate.

      If you open one after filing, but before your 341, then your status has changed and you would probably need to advise the trustee.

      My personal opinion (and only my personal opinion) is that you form your new corporation the day after your 341 meeting. You can have everything in place, have your name reserved, and file. Forming a new corporation is relatively quick and simple.

      I would let the old corporation starve and start a new one, that way you can be free and clear of any old baggage.

      Are you subject to means testing?
      All information contained in this post is for informational and amusement purposes only.
      Bankruptcy is a process, not an event.......

      Comment


      • #4
        Sorry about the duplicate. It just seemed more appropriate for the other thread.
        Is there a way to remove this one.
        If I cannot, can moderator delete?

        Comment


        • #5
          No, I am not subject to means testing as I am way over 50% on the non-consumer side.
          So if I advise the trustee at 341 that I have started a new business and that is how I am being paid now, there is no objection they could have?

          I don't want to be accused of fraud, but this looks like a blatant evasive tactic. Are you saying that maybe they scowl but there is nothing they can do if it is done after filing?

          Comment


          • #6
            Originally posted by porkchopcash View Post
            Are you saying that maybe they scowl but there is nothing they can do if it is done after filing?
            I don't recall saying that.......

            I do recall saying that I would probably wait until after my 341 to start the new corporation.
            All information contained in this post is for informational and amusement purposes only.
            Bankruptcy is a process, not an event.......

            Comment


            • #7
              Originally posted by frogger View Post
              I don't recall saying that.......
              Not trying to put words in your amphibious mouth

              I just wanted to clarify my understanding. Certainly, I am going to wait until after my filing but want to make sure I do not do anything that will muck up my 341.

              With all the great input on this board, there have to be some others who have had similar experiences. I am hoping they will chime in.

              Comment


              • #8
                I tell my clients that so long as they are not diverting assets out of the already existing corporation they can start a new corp or LLC the day after the case is filed. After acquired assets, in general, are not property of the Chapter 7 Estate. However, the new corp cannot use anything that belongs to the old corp such as phone numbers, advertising, (blue sky), receivables etc. as that belongs to the Trustee through the ownership of the stock.

                Des.

                Comment


                • #9
                  Originally posted by despritfreya View Post
                  I tell my clients that so long as they are not diverting assets out of the already existing corporation they can start a new corp or LLC the day after the case is filed. After acquired assets, in general, are not property of the Chapter 7 Estate. However, the new corp cannot use anything that belongs to the old corp such as phone numbers, advertising, (blue sky), receivables etc. as that belongs to the Trustee through the ownership of the stock.

                  Des.
                  The assets of the corporation can normally be bought back from the trustee for a negotiated price. I know that I bought the blue sky back from a trustee because I wanted the phone number......
                  All information contained in this post is for informational and amusement purposes only.
                  Bankruptcy is a process, not an event.......

                  Comment


                  • #10
                    Des,
                    Thanks for the reply. The new corporation would really just be new paperwork and a new checking account. There is no blue sky value. The only thing transferred over is that clients still contact me on the same cell phone # but that is not included in any advertising. (most of my business comes through word of mouth and referrals).

                    As for accounts receivable, I am planning my filing so the old S corp has none at time of filing. This is not too difficult as business has been slower lately. However, this may seem suspicious to trustee as my last deposit was about a month ago for $12,000. But this is a feast or famine business.
                    It is possible I could get $25,000 project right after filing and it will go into my new s corp.

                    BTW, the other reason for letting the old S corp die is a payroll company ripped me off for about $10,000 in payroll taxes they deducted from my account then did not pay IRS. No way for me to recover that as I am a creditor since they filed bk7 after owner was arrested. (great luck I have had this past year)

                    If I let old S corp die, then I can only be held liable for 1/2 that amount as officer of corp. If IRS does not pursue me personally in three years, the liability is gone.

                    I just don't want to raise any red flags with new business. I want to discharge cleanly.

                    Comment


                    • #11
                      if you don't mind me asking, how much did you have to pay for a phone #?

                      Comment


                      • #12
                        The purchase of the assets (actually the stock) is something that is negotiated with the Trustee. If you purchase the stock from the Trustee the amount you pay will most likely be different from what Frogger paid.

                        Any contract you sign after the filing date, if it is in your name or the new entity's name, is not a concern of the Trustee. Yours is a service business.

                        Des.
                        Last edited by despritfreya; 02-24-2011, 10:22 AM. Reason: grammer

                        Comment


                        • #13
                          Des,
                          I would hope that with the outstanding tax debt and no accounts receivable, the trustee would just abandon the business.
                          Is that possible.

                          Comment


                          • #14
                            Originally posted by porkchopcash View Post
                            Des,I would hope that with the outstanding tax debt and no accounts receivable, the trustee would just abandon the business. Is that possible.
                            Yes, it is possible. Normal procedure for my office is to contact the Trustee, ask him/her what documents he/she needs to determine that there is no value and, once so determined, ask him/her to issue a Notice of Abandonment. We even offer to type the document for his/her signature. As long as there is no value this approach works every time. Then my client does not need to start a new entity.

                            Des.

                            Comment


                            • #15
                              Des,
                              Awesome information. Thanks for the help, my bk attorney is out of town this week and I will not be able to discuss with him till next week.
                              One more question. Do they abandon before 341 and can they "un-abandon" if large sums of money come into the account?

                              Comment

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