Buying S-corp assets from trustee.

[DivorcedArt]

I have a question about buying business assets from the BK trustee.

Note: $40k secured debt backed 50% by the SBA, $53k unsecured debt, $15k assets

I'll be filing Ch 7 for both the S-corp and personal. Since the 'value' of the S-Corp assets are fairly low, I'd like to buy them if possible. I'm trying to visualize the process. Let me outline what I assume is the process and feel free to comment or answer a question or two if you can.

1. Inventory all assets.
a. Larger machines and tools.
i. Use Depreciation Schedule to check completeness.
ii. Take pictures of items on list
-a few items are missing/lost, not sure how to deal with that.
b. Smaller tools/incidentals
i. Screwdrivers, screws, blank CDs, office supplies, shop supplies, shelf brackets, toner cartridges, etc., etc.
-do all these things need to be listed??
c. Raw material inventory

2. Establish a value of assets.
a. Larger machines and tools
i. How do I calculate the value of each? For instance: 10HP Air Compressor, purchased 7/6/03 for $1,114. Sec. 179 on taxes in the first year. How would I establish the value of this? Look for a used one online? Use some rule-of-thumb equation? Ask a used machine dealer (probably not interested in something so small). Pull a number out of my head... say, $350?
b. Smaller Tools/Incidentals
i. Do they really want all of this stuff turned over to auction? En masse it might be several hundred dollars. It would be a pain to deal with, however.
c. If I have copper components stamped out, and copper wire, I assume the value is the scrap value of the copper, by weight?

3. Total the value of all the assets and make an offer to the trustee?
a. I'm guessing all the assets together will be less than $15,000. Would I/Should I make an offer of $7500 for the whole lot? Would a trustee be likely to accept an offer like this?

I'm guessing that is the process, but I have no experience what-so-ever. Please comment if you can.

[HHM]

You will probably need to fork out cash for an appraisal.

Other than that, your assumptions are basically accurate.

Keep in mind, the business entity probably does not need to file its own BK.

[DivorcedArt]

Keep in mind, the business entity probably does not need to file its own BK.

I've been thinking about this statement. Are you saying you think all the debts could get discharged, personal and business, with just the personal Ch 7?

[HHM]

First, businesses DO NOT receive a discharge. When a business files BK, it is merely shut down and liquidated. When the business dies, that is like a defacto discharge. In either case, the business dies. The thing is, most people, with a little guidance, are more than capable of shutting and liquidating their business. It is the personal BK that is vital. The personal BK discharges the debt as to you and protects you from the financial consequences of the failed business.

[DivorcedArt]

Great info. Thanks so much!

[blockhead]

No need to close s-corp

I still have my C-corps, and I am in Ch7 no asset case, because the C corps liabilities are worth more than their assets so the shares the BK estate own are worthless, and show as such on the schedules, value zero.

You'll need a CPA to do a profit/loss and balance sheet