Will Trustee take my Business??

[carlsbadmike]

Taken from: http://www.lexpertise.net/node/1581 When a business fails, anyone with a financial interest could have a potential claim on the failed entity including investors, lenders, trade creditors, employees, suppliers, customers, and the government (e.g. the IRS or state taxing authority). If those interests and claims are not properly addressed during the wind down process, the officers, directors and stockholders could be held personally liable long after the business entity ceases to exist. How you treat each of the affected persons is critical to successfully shutting down a business. From the moment you first decide that failure is a possibility, it is important to take control of the process and work with legal counsel as well as tax and accounting professionals to properly address the issues.

Doing a crash and burn by leaving the business open was not an option, for me. Some people may handle the situation differently. This is what I was advised to do.

Perhaps I should have posted my response as part of another posting instead of this one(will trustee take my business). I am only relating how and why my case was handled this way

[keepsmiling]

I'm with Magua....baffled. (bear with me here, I just learned how to do smilies and need to get it out of my system)
What is the point of dissolving the business? Is this only if your a/p exceeds your a/r?

Might they tell my sole prop dh he has to get out of the law biz??? Not that he wouldn't love to, but what then?

[carlsbadmike]

My business was a failing S-Corp. that I no longer wanted to operate. My attorney advised me that this was the best way to handle my situation. There are pro's and con's on this website regarding this matter so I guess it varies on a case by case basis, attorney's advice, etc...

[magua2]

My attorney said that I had to dissolve my service business in combination with doing my personal CH7. I only had a few computers as assets, a/p that exceeded my a/r, no employees and without me there would have been no future business/income.

This doesn't make any sense. If your business has no assets or your business debt exceeds your business assets, the trustee will likely abandon your LLC or S-corp. Were you operating as a sole-proprietor without a separate business entity? Even if you were, I don't see the reason why a person would have to dissolve his company. The trustee's job is to make money for your creditors, not to ruin your business if there is no financial reward for doing so. Only if your business has a value is it worth the trustee's time to liquidate your company. Someone please enlighten me.

[msm859]

My attorney said that I had to dissolve my service business in combination with doing my personal CH7. I only had a few computers as assets, a/p that exceeded my a/r, no employees and without me there would have been no future business/income. I had to provide profit and loss statements for the last 4 months and business tax returns for the last 2 years which were looked at by the BK trustee. When the trustee asked about the business, my attorney told her that we were winding it down and then there were no further questions about it. On this site I have read that it is necessary to dissolve a business(including service businesses)when filing personal BK, which concurred with my attorneys advice. Why is it not necessary in some service business situations without inventories?

Well I can say in CA I did not have to dissolve my personal service business. My attorney told me theoretically the Trustee could try to close it down and lay off my 1 employee, then we would have to file a motion to abandon. He could not sell my business - as people come to "me". He initially asked for $5k to abandon and I paid $2500 which means he got $625 and my creditors make a claim for the rest (which all will go to the IRS as a priority creditor). In some ways it was extortion since the business did not really have any blue sky value. However, if you can make the Trustee happy for $625.00 and insure no other issues it was worth it - total costs of BK $995 atty fees + $299 filing fee + $625 make trustee happy fee = discharge of $200k + = good business decision.

[carlsbadmike]

My attorney said that I had to dissolve my service business in combination with doing my personal CH7. I only had a few computers as assets, a/p that exceeded my a/r, no employees and without me there would have been no future business/income. I had to provide profit and loss statements for the last 4 months and business tax returns for the last 2 years which were looked at by the BK trustee. When the trustee asked about the business, my attorney told her that we were winding it down and then there were no further questions about it. On this site I have read that it is necessary to dissolve a business(including service businesses)when filing personal BK, which concurred with my attorneys advice. Why is it not necessary in some service business situations without inventories?

[BigJohn]

Your $400.00 inventory is worth about $40.00 on Craigslist.

I would reduce the inventory to close to zero as possible.

As for the name of the business, go to the State building and visit the Secretary of the State's office and get the name of the business tradenamed. That will sit you back $10.00.

Next go to an office supply store and buy the program that can make checks and has some blank checks.


If the trustee takes your business, good ridance. Create a new business and whatever the name of the bussiness is, call it when you answer the phones by the tradename. Create new checks and use the tradename on the checks but run the checks under the new business name. As far as anybody will be able to see, the old business that might disappear will be 'operating' as if nothing had happened.

[carlsbadmike]

Outcome

Phx,

Please let us know the outcome of your situation.

Thanks.
Mike.

[carlsbadmike]

Bump...

[carlsbadmike]

I had to provide income/loss statements. I had quite a bit more a/p than a/r so there was no value. My business income had dropped by 95% which would no longer support the business or me. The remaining business was not guaranteed and I couldn't sell it. I personally guaranteed credit for the business. It was my only source of income.

[Phx]

Sorry to hear that.

How did they determine the value on your service business? Did you argree with the value?

Did you have the opportunity to buy it back? (assuming you wanted to)

Any advice?

I want to keep my business; It is how I pay my bills!

Thanks

[carlsbadmike]

I had to dissolve my business, which was a service based S Corp.

[Phx]

If other similar businesses have sold for $20-$25K, would that value be used by the trustee as an asset even though it's a service based business?

Carlsbadmike- This is what is confusing to me. That value is based on me selling my accounts to another company in the same industry. The process would take months (assuming I could find a buyer who wants the accounts) and in the meantime, I would still be servicing the accounts on a weekly basis.

IF - I am required to turn the business over, who will service the accounts while the Trustee finds a buyer? Not me!

IF - I am given the option to buy it back from the trustee. Can he really base the value on 20k?

Like Frogger said - hopefully the Trustee will sell if back to me CHEAP, realizing it's worthless without me! I am meeting with my attorney tomorrow; I will post back.

[carlsbadmike]

If other similar businesses have sold for $20-$25K, would that value be used by the trustee as an asset even though it's a service based business?

[msm859]

A service business based upon you is pretty worthless to anyone else. You may have to pay some blue sky to buy it back from the trustee, but it should be cheap.

Agreed. I had to pay $2500.00. I could have fought it but that would have cost at least $1,000 and the reality is the trustee gets 25% - $625 and the rest will go to the IRS as a preferential creditor. So as a business decision it made more sense to simply pay.