Does anyone have any experience in this
 

If you have an incorporated business/businesses and you declare the business to be bankrupt...what personal liability does one have...if any.

My brother thinks that there is little if any personal liability...in other words it does not effect your personal credit rating. He is thinking of starting two more businesses without having actually gotten the first one off the ground. He intends to verify with his accountant the liability aspect before he continues...in case the businesses go under.

Anyone with knowledge or experience in this area??

Anyone???

Going with a Corp. does not tie any of your belongings to the company as far as I know.

S-Corp

Yes...and...????

Input please??

Come on...you east coast people should be getting up and around now?

im up, and i know... i just cant remember

Had your coffee...feel alert now...is the memory returning?

http://www.ss.ca.gov/business/filings.htm

hope that helps :thumbsup

that'll be $50 for my finders fee

Send the bill to my brother. :1orglaugh

Well it sounds as if he is right and there may not be any personal liability...but as I stated he is going to verify this before he proceeds with opening two more businesses.

alright whats his billing address? :1orglaugh
what business failed? maybe he should goto school before he tries again.

Are you a LTD or Inc what class?
There are different rules for different types of companies.
It's always safe to assume that if your company owes money and goes under, the owners will get hit with a bill.

He has not had a business fail...you did not read the initial post carefully. He just recently opened up a business and it seems to be doing OK but in my opinion it is really to early to tell...but he wants to immediately open two more in two different cities before someone else does it. He wants to incorporate to protect himself from personal libility just incase they fail. He has been to school...works at a college and instructs at a college and will have his Masters at the end of December.

It is my brothers business not mine.

This is from the link that was provided by bringer.

"Corporation

A Corporation (Domestic - Articles of Incorporation/Foreign - Statement and Designation) generally is a legal entity which exists separately from its owners. While normally limiting the owners from personal liability, taxes are levied on the corporation as well as on the shareholders. The sale of stocks or bonds can generate additional capital and the longevity of the corporation can continue past the death of the owners. Legal Counsel should be consulted regarding the variety of options available for formulation."

:glugglug

He can close shop and goodbye charly, the thing is he has to make sure that in all the contracts he signed he never was a co-signer for the company etc.

It wont effect his personal credit as in the 3 credit reporting agencies but anyone that will do a search on him on a court house level will see he had a business where he was the president or whatever that went bankrupt.

Many who have corporations just close shop without filing anything, just notify the IRS etc. that its over.

Sounds good. :thumbsup

Just keep in mind that the government has changed the laws on how corporations work. And it's in their best interest not to allow people to create a corporation, rape it, bankrupt it, and then run with the money without repercussions. (Not saying that is what your brother is doing)
I would guess that he is a S corp. Where he is incorporated will make a difference, but like I said, The 80?s taught the government that it needs to tighten the laws on how to exact it?s pound of flesh from fledgling business.

I was 10% owner in a corporation that was sold out from under me, and the IRS was on me for 4 years about paying back employee taxes. We were a S corp. out of Delaware.

The real deal is this:
Most creditors today are asking for personal info on the corps officers before extending credit to "new" corps. (Less then 3 years in business) Our american express, merchant accounts,
and several others required my PERSONAL credit info in order to get credit for my corp.
This is because creditors have already been burned to the tune of millions, by people setting up corps, credit lines, then folding the corp and keeping the money stashed somewhere else.
Tell your brother he's just a little late, creditors are hip to the game by now.

An S corp. needs three officers.
President
Secretary
Treasurer.
This scenario would only work if he held interest, but no office (ie no control) which ties in to what I was saying before, if you own interest in a company and it goes under, you will be asked to pay.

he asked if it will effect his personal credit rating and the answer is that if he never co-signed they can ask you to pay from here to chicago they cant report you as the debtor.

Even if he hold an interest it doesnt matter if its a corp he is personally protected except from stuff like payroll tax etc.

I think he is going to be S Corp and it will be out of California.

If you review most of the new laws that where passed and the ones being talked about now you will see that most apply to public corporation or corporations and are mostly going to be enforced by the SEC.

Even as a private company that raises money under a 504 the same rules dont apply as if they where publicly traded.

I would have thought that someone with your business experience and wealth would know better than ask members of GFY a question like this.

Don't you think it would be wiser to ask a lawyer or accountant experienced in these matters?

Unless of course between the pair of you, you're unable to raise $200. :1orglaugh :1orglaugh

In other words he has opened the first business from his own finances and now wants to immediately open two more and he wants to incorporate so that he will not be personally liable if they fail and destroy his own personal credit rating.

I have not viewed any of the new laws as of late,
My experience is from the mid 90's.
I could be very off.
But I am pretty sure that the days of letting the "company' take the hit, are gone, and the owners of the company will end up paying one way or the other. Money owed will be collected. One way or the other, the people responsible for the "company" will be held accountable for the "companies" mistakes.
I quote the word company because it is treated as a separate entity.
Just to qualify my possibly outdated knowledge, my mainstream company made over 2 million in 6 months.
I was the person who brought back the ?Cat in the Hat? hats in the mid 90?s.

Clueless as ever and will remain so. I do not have any connection with his business. It is his and his alone. If you would read and are capable of comprehending what you read you would have read that he is going to verify the personal liability aspect via his accountant before he proceeds to incorporate and open the other two businesses. It really is amazing how you are always clueless...it would seem that you would become embarrassed at some point and just keep your pie hole shut. I am asking on the board to garner first hand experience to satisfy my own curiosity.

I understand that you would hope its over but its not, laws are laws and the fact is if you didnt sign as a co-signer yes people can call to try to collect but they cannot report you to the 3 personal credit bureaus.

Your name will show up if they do a D&B or other places where they can file but not with the 3 credit reporting agencies.

Clarify "co-signer" for me. He wants to get a loan to open the other two businesses...so how does he/the corporation get the loan without him signing for the loan. After all some one has to sign for the loan. Or are you saying that he personally cannot gaurantee the loan in the form of co-signing for the corporation...which in turn would make him personally liable for the loan if the coporation fails.

I think we are agreeing for the most part here.
Think of it this way,
If he busts ass, and makes it work, he won?t have to worry about Bankruptcy.
If it flops, and the IRS can connect him to it financially, he will be asked to pay.

Its pretty rare to find anyone that will extend serious amounts of credit to a small corporation without having key officers personally guarantee the money. Usually you can fuck over your wholesale suppliers and vendors, but the banks aren't so easy to get away from.

Most every future financing form he'll sign will have a declaration statement asking if he or any company he has owned has gone BK. If he lies he's fucked legally.

He has never been personally bankrupt and has never had a business go bankrupt. It is my understanding from him that he already has financing lined up...but I am not sure of the source. If need be...and he decides to take the risk...he can finance it himself.

all you need is an LLC... you do not have to incorporate to protect your personal assetts.