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Issues Opening a Business - Pre or Post BK

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    Issues Opening a Business - Pre or Post BK

    I think I am three months out before filing BK (Ch 7 hopefully). Waiting for tax refund.

    I was approached to go into a side business (consulting) with a friend who knows my situation. Minimal start up capital required. (Cost of incorporation, opening a bank account, office supplies...)

    Obviously, I don't want to raise any red flags. When would starting up a new company be okay? Could I do it before filing or does it immediately become an asset even without any revenue? If I wait until after filing, should I wait until after the 341?

    Also, recommended business designation?

    #2
    Your shares in the corporation/partnership/LLC, would become an asset of the bankruptcy estate. Whether or not there is sufficient value for a Trustee to be interested in selling the shares (perhaps to the other partners/owners) can only be analyzed on a case-by-case basis. Remember, a corporation has a value based on its assets. I don't think the Trustee would care about some letterhead (paper) and some staples.

    To be safe and to not need to list the shares in your schedules and the Corporation on your Statement of Financial Affairs (SOFA), just wait... if you can. Consult a corporate attorney but perhaps your friend can still create the corporation, with your input, and sell you shares later.

    I can't recommend a business organization. You will need to look at the organization from multiple angles including, but not limited to, taxation, licensing, assets and asset protection, growth, number of owners, etc. From my personal experience, an LLC covers most "partnership" arrangements. There are some specific things you must do when reporting. You want the maximum personal protection while giving you the broadest ability to conduct business with a partner (or partners). It's one thing to have an LLC with family members, but totally different with friends/acquaintances! Well, maybe we should treat family as hostile as well, when forming corporations!
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    I am not an attorney. Any advice provided is not legal advice.

    Comment


      #3
      Thanks for the reply, Justbroke.

      I'd like to play it safe. What do you think the waiting period should be. After filing, after 341, after discharge or after case closes?? I would hate to wait 6 months.

      Comment


        #4
        And, I kinda agree on treating family hostile, too!! ;-)

        Comment


          #5
          Originally posted by alo View Post
          I'd like to play it safe. What do you think the waiting period should be. After filing, after 341, after discharge or after case closes?? I would hate to wait 6 months.
          I'm sure that any bankruptcy attorney which you consult prior to filing (remember, free consultations!) would say that anytime after filing should be fine. So long as you're not hiding assets or trying to hinder creditors it could be done before filing, but that would just create more questions.

          Do you know what your cost of the shares will be?
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog

          I am not an attorney. Any advice provided is not legal advice.

          Comment


            #6
            Nope, not trying to hide anything. Just an opportunity to make more income, build savings and security for the future.
            I've learned my lesson on debt but still have aspirations. One goal is to eventually own income generating real estate...but that is down the road...and hopefully poor credit won't limit me for too long.

            I suppose I can work something out with him to buy share if we need to incorporate before I file. It can't be priced too high if there's very little income.

            Comment

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