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Roger
Roger, Attorney
Category: Bankruptcy Law
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Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by West
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if a LLC business files for bankruptcy, can the owners start

Resolved Question:

if a LLC business files for bankruptcy, can the owners start up a new business? if so would/ could they form a new LLC?
Additional, if the answer if yes, wold there be any restrictions?
thanks
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Roger replied 1 year ago.
Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney. Thanks for your question.

Yes, the owners can start up a new/separate business as a new LLC.

The only thing you would have to do is make sure that the new LLC stays separate from the bankrupt one. You don't want to be accused of trying to skirt the bankruptcy code. Thus, you can't use anything you don't buy from the old LLC to help prove that these are not identical filings. Also, you should have new officers, if possible with new bylaws, typf of business (if possible).
Customer: replied 1 year ago.

Thanks


Sorry, im a bit confused..


So we cant take or use anything from old business?


what do you mean by identical filings?


 


what does the following mean? Thus, you can't use anything you don't buy from the old LLC to help prove that these are not identical filings. Also, you should have new officers, if possible with new bylaws, typf of business (if possible).


 


Thanks

Expert:  Roger replied 1 year ago.
Hi -

Your new LLC must not be considered as being an alter ego of the previous LLC. If so, you could find the new business being dragged into bankruptcy as the same company/business as the first.

As for using property from the old business, if the current LLC files bankruptcy, all property must be reported to the court and trustee, so nothing can be taken and given/gifted to the new LLC. Anything that is transferred must be sold at fair market value in order to keep the bankruptcy court/trustee from challenging any such transfer.

In regard to the filing comment, I'm referring to the formation documents you file with the Secretary of State - - they don't need to look identical as that could raise issues about this new LLC being a legitimate new business. Thus, you would need some new names for those spots to prevent the court from attacking the new LLC.
Customer: replied 1 year ago.


Filing comment - you said they dont need to look identical? what the old company and new?


So for instance the old company dba was "MOVERS" it would be prudent to name the new dba as "MOVERS?

Expert:  Roger replied 1 year ago.
Yes - the corporate documents of the old and new LLC don't need to look the same with the same officers, same name, etc.

Yes - the new LLC's dba should not be the same.
Customer: replied 1 year ago.


ok thanks, XXXXX XXXXX how we cannot have same officer names when it is us?


if the dba was slightly changed would that be ok?


and lastly, if we dont file bankruptcy and open another location. but later file bankruptcy on the first location. Would the courts come after the second location


many thanks

Expert:  Roger replied 1 year ago.
You may have to make others officers and keep your names out of the public filings for a while.

Yes, if you change the dba at all, that should provide you the protection you need.

It would likely be better if you opened a new business BEFORE you filed bankruptcy on the current one. That would show a separation between the two entities. If you did this, you could be officers of the new company, BUT you wouldn't need to use the equipment of the current company UNLESS you rent it (with a written rental agreement) or unless you actually purchase the equipment for fair market value.

But, that's likely the best way to keep your new business from being implicated.
Customer: replied 1 year ago.

thanks, XXXXX XXXXX

Expert:  Roger replied 1 year ago.
Glad to help. Please let me know if you need anything further. Thanks.
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 26148
Experience: BV Rated by Martindale-Hubbell; SuperLawyer rating by West
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