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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 111450
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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Hi, We represent a business which is completely gone under.

Resolved Question:

Hi,
We represent a business which is completely gone under. We don’t have any revenue as we have stopped producing services. We have no employees. We owe payroll taxes to the government and the management team is currently working with IRS to settle the same. Also we owe state taxes and we are working to getting a settlement on the same. Meanwhile we owe payroll to old employees to whom we were not able to pay for the last few months. Some of them have reached out to labor dept complaining about the situation. We are in a tough situation as we are handling so many issues. We want to get appropriate advise on how to handle the employee backwages as some of them have hired attorneys to recover the funds. Since we are not in a position to pay these employees can you please advise us the right solution.
Thank you
Submitted: 4 years ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 4 years ago.
Unfortunately, you are going to have to properly wind up business and this means in a case like you just described that you would have to file for bankruptcy. In a bankruptcy, employee payroll is put in with the secured creditors, but if there is no money, then the pay is extinguished. Bankruptcy will not help with any tax issues as those can pass on to the owners personally after bankruptcy if no deal is reached or they are not extinguished.


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Customer: replied 4 years ago.
Relist: Answer quality.
Customer: replied 4 years ago.
Hi,

We are more focused on understanding our options for getting rid of paying the backwages. Will filing of bankruptcy protect us from labor dept?

Is this the only option?

Thank you
Expert:  Law Educator, Esq. replied 4 years ago.
Yes, bankruptcy will protect you from personal liability for labor debt and yes that is your only option because absent bankruptcy wages are going to be paid and they can sue you and seize business assets for wages.
Customer: replied 4 years ago.
Right now we dont have zero business assets. Only thing we have is debt.

Can the employees sue the owners?

If bankruptcy is filed what will labor dept in regards XXXXX XXXXX complaints they get from employees?

Are there any industry experts who can negotiate with these employees to settle the amount for a lower amount as we are under tremendous pressure talking to these employees and asking them to hold on a daily basis. In an ideal world we would have wanted to pay these guys but we have no means of revenue now.
Expert:  Law Educator, Esq. replied 4 years ago.
You need to properly wind up the business and if it cannot pay debts as they are due, then bankruptcy is required. Only your attorneys could try to negotiate payment, but you are going to have no choice but bankruptcy if you have no assets.
Customer: replied 4 years ago.
Paul,

One last question. How will labor dept treat bankruptcy? Do they go after business owners?

Thank you
Expert:  Law Educator, Esq. replied 4 years ago.
Not for wages unless they prove the employees were not paid because of fraud.
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