How is personal income assessed when you own and operate a corporation?

[squeeze]

If you own and operate a corporation, how is personal income assessed during the means test?

An obvious way to pass the means test would be to pay yourself a low salary for six months, keep any additional profits in the corporation as retained earnings, then issue yourself a bonus sometime later on.

Would the fine folks down at the courthouse have any ol' problem with this?

[whipster1]

But the corporation is your asset. If you can't exempt it, the Trustee might liquidate it.

[squeeze]

Let them have the corporate assets then.

The question still remains - is this an easy way to pass the means test?

[whipster1]

You will not be able to "game" the system. They will look at all of your financial records for 2+ years. Your tax returns for 2 or more years...Probably the corporation records too since it is your asset. The means test is only for presumption of abuse...if the trustee smells something funny the fact that you passed the means test "means" nothing.

[DeadManCrawling]

I thought the same thing as you did. At first.

I own my own corp as well, and this is NOT a method you want to consider.

On filing, the corp becomes an asset of the BK estate. Any retained earningss, therefore, are fair game and will be taken to pay your personal debts. If the business has A/R, they become property of the trustee. If the corp has assets, cash, inventory, they will be seized or sold, unless you can exempt them. This includes money set aside to pay employees, employee benefits, medical, insurance, undeposited retirement, unpaid tax money. Everything.

Having a corp paints a giant bullseye across your forehead. Unless the business is only operable with your particular skills or talents. If it is ALL intellectual, and runs off a computer and your mind, they cannot seize that.

But they will take all outstanding A/R.

I have posted too many times on methods to avoid this, but you can search my posts to find the info.

I have spent three years letting income decline and making other decisions to aid my BK planning. Literally, three years. You can see when I joined the forum. Once I understood the gravity of the issue, I realized this is a long-haul proposition.

If you own a business, you need to research and plan, if you hope to keep the company operating through and after BK.

If the business has no importance to you, or assets, then by all means, file blindly.

Trustees LOVE people who try to jack with the means test through manipulating their own business and income.

Hard truth, but truth it is.

Best wishes,

-dmc

[squeeze]

Will they seize the corporate name? If the 1st corporation becomes an asset of the trustee, can you create a 2nd corporation under the same name and start over again?

- - -

If not, then can you create a 2nd corporation under a new name and start over again? Can you copy marketing material and adapt it to the 2nd name? Can you hire employees who were in the 1st corporation into the 2nd corporation? Can you reproduce the website - taking the same content from the 1st website and putting it onto the 2nd website? etc.

Presumably such corporate assets as marketing collateral, website content, logos etc are worthless to the creditors, since after all they don't intend to start running the business themselves...

So why would the creditor's care if you just copy everything when you start over?

[DeadManCrawling]

All intellectual property, including copyrights, web design, trade secrets, becomes property of the trustee.

Any attempts to hire away employees will work or not work, depending entirely on the trustee. An attempt to destroy contacts and essentially sabotage your business while opening a duplicate company will cause a lot of grief.

The trustee may not go so far as to sue for all this. But he/she does not have to. If they see this happening, all they have to do is motion for dismissal of your bk. Then the creditors are again sharks in the water.

I'm telling you, there are ways to do this legally, and without raising eyebrows. You should take the time to learn more.

You probably can save your business, your intellectual materials, your website(s) and all of it, if you are aware of how the law works, and more importantly, how it applies to you and your situation.

Also, with regards to a CH 13, understand that a 13 does NOT mean you pay it ALL back. Unsecured creditors can receive ZERO percent. You may be overthinking things, and risking far more than necessary by trying to pursue a 7 at all costs.

If you have specific business questions you do not feel comfortable sharing on an open forum, please PM me.

My only interest is in helping you avoid mistakes that could ruin you and your business. I know firsthand what it means to build a successful business.

Good luck

[DeadManCrawling]

Oh, far as the name. Yes, if the trustee taes the business, the name goes with it.

In almost every state, you cannot open a new business with the same name, in the same line of business.

For instance, if you are currently named "Rollerball, Inc." The state will not approve a new company named "Rollerball(s) Inc" in the same line of business.

And if the name was that valuable, the trustee would sue and win.

It is very rare for trustees to take over a business and operate it while placing it for sale. Almost unheard of. You may have the option of buying back any unexempted parts of the business, too. While this sounds hideous, paying for a business you created, it can be effective and still stave off creditors while giving you time to pay the fee.