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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
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Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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THIS IS A QUESTION FOR CALIFORNIA LAW. I HAVE A PARTNERSHIP

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THIS IS A QUESTION FOR CALIFORNIA LAW. I HAVE A PARTNERSHIP WITH RICHARD WHO HAS A CA CONTRACTOR'S CONCRETE LICENSE. MY NAME ISXXXXX DO NOT HAVE A CONTRACTOR'S LICENSE. I DO ALL THE BOOKS AND RICHARD BUILDS THE PROJECTS. NOW RICHARD NEEDS TO FILE PERSONAL BANKRUPCY. WE WANT TO START A CORPORATION FIRST BEFORE RICHARD FILES BANKRUPCY. I WILL BE CEO/PRESIDENT AND RICHARD AND OFFICER BECAUSE WE NEED HIS CONTRACTOR'S LICENSE. THE BUEINESS NAME WILL BE THE SAME WE WILL JUST ADD, INC. ON THE END AND OPEN NEW BANK ACCOUNTS. OUR QUESTION IS: HOW WILL FILING CJHAPER 7 AFFECT THE CORPORATION? HOW WILL IT AFFECT HIS CONTRACTORS LICENSE? WILL RICHARD STILL BE ABLE TO WORK ON THE PROJECTS? THE CLIENTS WILL PAY THE CORPORATION INSTEAD OF THE BUSINESS. OR SHOULD BE FILE CHAPTER 11 FIRST?
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 4 years ago.

Hi.

 

When you say that you have a partnership, is this a separate legal entity (LLP, LP, LLC), or just a handshake. And, if a handshake, how do you and Richard file your tax returns for this partnership?

 

Your issue may be significantly more complicated than you think. Partners are jointly liable for partnership debts -- so, if you have a handshake partnership, and Richard files for Chapter 7, then you may be on the hook for Richard's debts incurred in connection with your partnership.

 

Probably not what you wanted to read, but I'm not gonna sugar coat things.

 

Hope this helps.

 

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Customer: replied 4 years ago.
MAYBE I DIDN'T MAKE MY QUESTION CLEAR.
FORGET THAT RICHARD AND I ARE PARTNERS; WE BASICALLY JUST WORK TOGETHER. THAT BEING SAID I AM STATE THE FOLLOWING:

1. RICHARD NEEDS TO FILE PERSONAL BANKRUPCY BECAUSE OF BILLS AND LAWSUITS.
2. WE WANT TO START A CORPORATION FIRST BEFORE RICHARD FILES BANKRUPCY. I WILL BE CEO/PRESIDENT AND RICHARD AN OFFICER BECAUSE WE NEED HIS CONTRACTOR'S LICENSE.
3. EVERYTHING ABOUT THE WAY WE DO OUR BUSINESS WILL BE THE SAME EXCEPT WE WANT TO INCORPORATE.

QUESTION: CAN WE DO THIS AND THEN RICHARD FILES BANKRUPCY AFTER THAT WITHOUT IT AFFECTING HIS BANKRUPCY.

QUESTION: CAN RICHARD STILL WORK AND THE CORPORATION RECEIVES THE INCOME WITHOUT IT AFFECTING HIS BANKRUPCY.

QUESTION: CAN WE OPEN BANK ACCOUNTS IN THE NAME OF THE CORP BEFORE RICHARD FILES BANKRUPCY WITHOUT IT BECOMING A PART OF HIS BANKRUPCY.

QUESTION: OR SHOULD HE FILE CHAPTER 11 FIRST?


Expert:  socrateaser replied 4 years ago.

QUESTION: CAN WE DO THIS AND THEN RICHARD FILES BANKRUPCY AFTER THAT WITHOUT IT AFFECTING HIS BANKRUPCY.

 

A: If Richard moves assets or accounts into the new business, the bankrupcy trustee can avoid the transfer and dismiss the bankrupcy, leaving Richard at the mercy of his creditors. If Richard's contribution to the business is his labor only, then that would be okay.


QUESTION: CAN RICHARD STILL WORK AND THE CORPORATION RECEIVES THE INCOME WITHOUT IT AFFECTING HIS BANKRUPCY.

 

A: Yes. Earnings after filing Chapter 7 are the property of the debtor.

QUESTION: CAN WE OPEN BANK ACCOUNTS IN THE NAME OF THE CORP BEFORE RICHARD FILES BANKRUPCY WITHOUT IT BECOMING A PART OF HIS BANKRUPCY.

 

A: Yes, as long as none of Richard's (or the partnership's) assets are deposited into the account.

QUESTION: OR SHOULD HE FILE CHAPTER 11 FIRST?


A: I don't see this as an option, unless Richard's debts are greater than $1.4 million dollars.

 

Hope this helps.

socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34823
Experience: Attorney and Real Estate Broker -- Retired (mostly)
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Attorney and Real Estate Broker -- Retired (mostly)