Hello I am a licensed attorney here to help you with your question, please review my response and do not hesitate to ask for clarification.
How much percentage of the LLC does he have?
Did you have an operating agreement? Stating what would happen in this situation?
What State are you in?
Absent some provision in the operating agreement to the contrary, the member's LLC ownership interest becomes the property of the debtor's bankruptcy estate.
The trustee in cases such as yours will review the operating agreement, and if their is no provision than his shares are part of the estate, and you as the partner have an opportunity to purchase these assets at fair market value, and you should appear at your partners 341 meeting to make sure the trustee knows you are involved and are willing to take over the assets.
I would have to check the operating agreement. If interest does become debtor's property does that mean I would pay them a check every month until debt satisfied or they would have to accept the amount of his share of profit in the company at the time bankruptcy is filed.
his share of the profit should be paid to him directly unless the trustee states otherwise, it should be considered his income,
Any assets of the LLC is what is in trouble, for example any realestate property owned by the LLC can be forced to be sold by the turstee to pay off his creditors.
You would have a right to purchase his share through the Court.
Should I dissolve LLC before he files?
We have only liquid assets and a loan on a new car.
Regardless of dissolving the LLC he would have to still list any assets as part of his Bankruptcy, he can sell non exempt assets and purchase exempt assets, and this is called pre bankruptcy planning and should be done with his attorneys guidance. The liquid assets could be protected if put into an exempt account such as an IRA, the loan on the car, should not be an issue, if their is no equity in the car after the loan,
If I understand correctly they could take 50% of the liquid assets if he did not take them as a draw but not touch my 50% of profit?
yes, unless he can exempt the liquid assets into non exempt priro to filing.
do you know corporate law also as far as LLC vs S corp?
Yes, but in terms of a bankruptcy filing both are going to be part of the bankruptcy estate,
An S corp is good for a one person business, and if you want to dissolve the LLC and create an S corp just for yourself that is fine.
Would it be a good idea to change to an S corp with %)Can an LLC's partners be comprised of an individual as one partner and the other partner be an s corp or do both partners have to be the same entity?
I do not see any benefit in changing the corporate structure now,
You should wait until the bankruptcy is filed and completed.
If he does not file is an S corp a bad idea for 2 people with each having 50% of the shares? Considering this because of self employment tax being so high in the LLC.
An S Corp can own shares of an LLC,
We don't both have to be an s corp if partners?
One can be a s corp and the other you individually
You may want to amend your operating plan if he did not file yet, that may be the best thing to do/
Would it protect me better if I was an S corp as a partner?
In terms of liability an S Corp is better than as an individual.
If you have any further questions please do not hesitate to ask.
If satisfied please press the accept button so we can receive credit.
If my s corp is the partner then I would be taxed as an s corp within an LLC. How does that work
The LLC files a separate return, and you as the S Corp files a return on the income or profits taken from the LLC.
Would this benefit me?
I do not think the benefits are large for you, you are better off amending your operating agreement to make the LLC separate from the partners bankruptcy, and using the liquid assets to purchase exempt assets.
Thank you for your help
Am I able to save and print this?
Good luck, you have two issues here, one is how to protect assets during a partner bankruptcy and what you should do in the future, but first the bankruptcy issue must be resolved, and you should consider protecting the assets as much as you can, through a new operating agreement and using the assets to purchase exempt assets.
Yes, after you accept the chat is yours and will be sent to your user account.
In the future or after the bankruptcy you can consider other corporate options, such as becoming an S Corp.
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