Expenses under LLC

[tankist]

I self employed and operate under LLC (one owner) and I’m thinking to file chapter 7.

1. Is Trustee check expenses on my LLC?

2. Is Trustee check LLC’s Assets?

Thank you for comments

[StartingOver08]

1. Yes
2. Yes

[HHM]

For BK purposes, there is no difference between you and your LLC. The trustee steps into your shoes as owner of the LLC. Thus, if the LLC has any assets, outstanding receivables, etc, they are at risk in your BK.

[tankist]

Thank you,
It is no asset on LLC. Main question is that some of transaction on business account was made for personal use (low balance on personal account and no time to transfer between accounts), but this transaction was not included in tax return.
Are any problems with this?

[justbroke]

The LLC is use. Now, whether you have issues with the IRS is an entirely different matter if you claimed those "expenses" as business expenses.

As HHM wrote, the Trustee steps into your shoes as the operator of the LLC (sole member). The Trustee can expect to take the account receivables due at the time of your filing. Remember, A/R is an asset. Assets don't need to be physical. An asset could even be a patent or invention.

Depending on what your LLC really does, you probably want to get an attorney to file this case for you. Intellectual Property is hard to put a value on, so in many cases, the Trustee will abandon the LLC, but if there are large A/R balances or something tangible that the Trustee can get their hands on... it's game on.

[tankist]

It is no Intellectual Property in my business. Only sales commotions and payment for service.

[justbroke]

Then it will be your A/R balance at the time of filing, that the Trustee could be interested in.

[StartingOver08]

When you have a commission only business for your LLC, the Trustee will want to see your contracts that generate the commission. In fact, you most likely will have to provide (at least I had to provide) the tax returns for the LLC for at least 2 yrs as well as your personal returns. In my case the Trustee asked for 4 yrs of tax returns both personal and business. You will need to show your bank statements both personally and for the business. You will need to provide P&L's too.

I also have a commission only business and had to provide the contracts to the Trustee that generate the accounts receivable. If you have a change during the BK, then you may need to show the change. For example, I had short sale properties under contract at the time of my filing. My attorney stated right in my petition that the closing was unlikely (he used better terminology LOL) and naturally, when the contract was cancelled we supplied the cancelation.

All contracts in effect at the time of BK filing belong to the bk estate. AFTER the filing date, the income is yours. When you are planning your BK you will want to plan the flow of income, just like the W2 filers. It can be a little more complex, but no one knows your business as well as you do.

[Mensa1]

When you have a commission only business for your LLC, the Trustee will want to see your contracts that generate the commission. In fact, you most likely will have to provide (at least I had to provide) the tax returns for the LLC for at least 2 yrs as well as your personal returns. In my case the Trustee asked for 4 yrs of tax returns both personal and business. You will need to show your bank statements both personally and for the business. You will need to provide P&L's too.

I also have a commission only business and had to provide the contracts to the Trustee that generate the accounts receivable. If you have a change during the BK, then you may need to show the change. For example, I had short sale properties under contract at the time of my filing. My attorney stated right in my petition that the closing was unlikely (he used better terminology LOL) and naturally, when the contract was cancelled we supplied the cancelation.

All contracts in effect at the time of BK filing belong to the bk estate. AFTER the filing date, the income is yours. When you are planning your BK you will want to plan the flow of income, just like the W2 filers. It can be a little more complex, but no one knows your business as well as you do.

So StartOver, how did all the gnashing of TT teeth turn out relative to the LLC's?
Did TT raid the properties, commissions, etc?
When you refer to contracts, were they pending real estate contracts, leases?
Did you end up with any of the LLC properties when it was all said and done?

[StartingOver08]

Short answer: everything turned out fine, No Asset personal BK 7/Discharged. The contracts were pending sales. I had sold my personal rentals except for one prior to filing. I surrendered my own residence and the remaining rental in my BK. The Trustee had 2000 documents to review, and my 341 was continued one time. But everything was exactly as stated on the petition and I was successfully discharged of $1M in debt.

Long answer: I am a real estate agent. By the time I filed my BK, I had only two pending contracts that I was certain would not close (because of the issues involved and this was in Sept 2008). I also knew that I would have to close my S corp (which was a PA, similar in structure to an LLC but geared to service businesses like accountants/brokers/attorney's etc). I knew I needed to close the PA because the debt owed by the corp is still due if you have filed a personal BK. Only my personal liability was discharged. If I had continued to use the corporation, then any proceeds earned after my BK filing deposited into the corp account could be siezed by the corp creditors. I therefore closed that corporation. I will open another corp but in the meantime operate as a sole propriator so I have no issues with corp creditors. I personally did not want to retain any property because here in S Fl we are so upside down. BTW, I am glad. It is much easier to start over with nothing on the debt side then to carry over debt that might take yrs from which to recover.

[Mensa1]

StOv08: Did TT take the property in the LLC or did it just foreclose by the lender?

Got one coming up where there are 4 separate entities, so it will be interesting> NOT

[BCA2009]

Startingover08 - Question

Startingover08,I know this is going off topic, but since you have a Corp Entity for a single owner I have a question.

What benefits do you get from have the corp entity rather than just being a schedule C filer? My wife is about to sign a consulting contract. She will be a "1099 empolyee". Basically working for herself. It will be 100% commission. Other than the "corporate veil" to protect from certain lawsuits, I can't think of a reason to create a corporation (LLC, S-corp, etc).

Any advice is appreciated.

[Mensa1]

Startingover08,I know this is going off topic, but since you have a Corp Entity for a single owner I have a question.

What benefits do you get from have the corp entity rather than just being a schedule C filer? My wife is about to sign a consulting contract. She will be a "1099 empolyee". Basically working for herself. It will be 100% commission. Other than the "corporate veil" to protect from certain lawsuits, I can't think of a reason to create a corporation (LLC, S-corp, etc).

Any advice is appreciated.

BCA: I'm not StOv but I can answer your question. Yes, the corp vail is there, although that may be over-hyped at times for a small company because if something goes wrong usually the owner's finger prints are on the act that went wrong so there can easily be a suit involving the owner personally. Seen it too many times.

However, I am a big believer in the use of S-Corp or LLC. There are tax advantages with the use of the S-Corp. Self employment taxes can usually be eliminated on a large portion of income that may save 5-8K per yr alone. The other main advantage of using an entity is the elimination of the filing of a Schd C. They are death when it comes to an audit; much higher ratio of tax audits involving Schd C's, if you have biz expenses that you write off, than small Corps. All too many self employed indiv's write off lots of their income and that is an immediate attention getter for Schd C filers. Just my opinion.

[justbroke]

I agree that changing the structure of a business to S-Corp or LLC can have benefits. I had an S-Corp.