If you are an owner or partner of a small business in the San Diego area and need to file bankruptcy, either personally or for your business, you will naturally be concerned about whether you will be able to keep the business and all of its assets. Most San Diego business owners are able to file bankruptcy and keep their business and business assets with the help of an experienced attorney.
Keep Business in Bankruptcy San Diego
Whether you can keep your business and its assets when you file for bankruptcy partially depends upon whether the business utilizes the corporate form, and on the value of the business and its assets. Value would include both the tangible assets, such as equipment, and the intangible assets, such as goodwill. Generally speaking, if the value of your interest a business is covered by your applicable exemptions, then you can keep the business and its assets. Here are the points that your attorney will consider and discuss with you in determining if you can keep your business in bankruptcy San Diego.
Sole Proprietorship Business
A sole proprietorship business, is treated similarly to any other asset when you file bankruptcy in San Diego. You and your lawyer will place a fair and reasonable value on your business and business assets, whether based on an appraisal or some other valuation, and then the value must be covered by your applicable exemptions in order for you to keep your business.
On a case by case basis, the court appointed trustee overseeing your case may perform his or her own valuation. But if you and your lawyer have placed a fair and reasonable value on your business, then the trustee's valuation is not likely to differ much from the value stated by you and your lawyer.
If the value of your business is less than or equal to the amount of assets you are allowed to keep under your applicable exemptions, then you will keep your business and all of your business assets.
If the value of your business is greater than the amount of assets you are allowed keep under your exemptions, then you will have to either give up a portion of your business assets (to the extent they exceed the amount you are allowed to keep), or, more commonly, you will keep the assets and pay the trustee a sum of money equal to the amount of your assets that exceed your exemptions.
If you have business credit cards, they will be treated like your own credit cards. They will be eliminated with your bankruptcy filing, assuming there was no fraud or other wrongdoing in connection with incurring the debt.
Corporation or LLC
A corporation or Limited Liability Company (LLC) is regarded by the law a separate legal entity, This means that your corporation or LLC is essentially treated like a separate person when you file bankruptcy. When you file your case, you and your lawyer must arrive at and place a fair and reasonable value for your shares in the corporation or your membership interest in the LLC. The fair valuation must be based on what someone else would pay for the shares or membership interest.
On a case by case basis, the trustee overseeing your case may perform his or her own valuation to see if yours is reasonable. But if you and your attorney have placed a fair and reasonable value on your interest in your corporation or your LLC business, then the trustee's valuation is not likely to differ much from the value stated by you and your attorney.
If your interest in an LLC or corporation is within the amount that you are allowed to keep under your applicable exemptions, then you will keep all of your interest in your corporation or your LLC unaffected by your bankruptcy filing.
If your interest in the LLC or the corporation exceeds the amount that you are allowed to keep under your available exemptions, then analysis becomes a very complex and requires examination of your corporate documents by an experienced bankruptcy attorney and possibly a corporate attorney as well. Corporate by laws and buy-sell agreements may have particular provisions describing what happens to your interest in the business in the even of a bankruptcy filing. If corporate by laws and/or buy-sell agreements are silent on the subject, then, typically, your interest will be valued in similar fashion to a sole proprietorship business, which one HUGE exception: the debts of the corporation or the LLC will reduce the net value of the business and thus reduce the value of your interest!
Corporate Debts Reduce Net Value
If a corporation or an LLC that you own has its own business debts, these will reduce the net value of the business, since the corporation or the LLC, as the case may be, is a separate legal entity under the law. Even if you file bankruptcy, the corporation or the LLC still remains liable for its own debts. Because corporations and LLCs remain liable for their debts despite your bankruptcy filing, the LLC or corporation's debts reduce the net value of the LLC or corporation, and therefore the value of your membership interest in the LLC or value of your shares in the corporation is reduced proportionally.
The existence of corporate debts or LLC debts is therefore a significant and very important factor that must be considered by your bankruptcy lawyer when determining the net value of your interest in the corporation or in the LLC for purposes of placing a fair and reasonable value on your interest in your corporate or LLC business when you file bankruptcy.
We Protect Your Business and Assets
At Bankruptcy Legal Center, we never place your business or business assets in jeopardy. If we file bankruptcy for you, it means we are confident you will keep your business when you file bankruptcy, or we have discussed the ramifications of bankruptcy in detail and you have knowingly filed with the expectation that you will pay the trustee a certain sum of money to buy back your nonexempt equity in your business. This would give your creditors the same amount of money as they would receive if the trustee were to sell your business, give you the nonexempt equity, and distribute the rest of the sale proceeds to your creditors.
Often, proper planning for bankruptcy can involve protecting your business by forming a corporation or setting up an LLC. Formation of a corporation or an LLC should be done early on when you first start your business so as to avoid any implication that you are attempting to hide assets in the veil of the corporate form or wrongfully transferring assets to an LLC or to a corporation in an effort to hide the assets from your creditors.
In most cases, your bankruptcy lawyer can help you keep your business and business assets when you file bankruptcy San Diego. Talk to an experienced San Diego bankruptcy attorney to learn the effect of a bankruptcy filing on your business and assets.