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Good afternoon. Your S Corp is considered a separate and distinct entity than your personal account. Although your personal assets and your personal account would not be at risk for a judgment against your corporation, if the corporation has a judgment against you, the judgment creditor would have the right to attach your corporate bank account. To avoid this, you might want to form a new corporation and do business going forward through the new corporation so you have access to your income going forward.
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I thought that since the profits from an S corp are considered income they would be protected. I understand that if i have a judgement against me personally those funds would could be protected since i am the only income earner in the house. Since my pay comes out of my S corp isnt that the same thing?
Unfortunately, the assets of the corporation would not be protected. The S Corp is considered its own entity and its assets, including bank accounts, are at risk to a judgment creditor. This is the part of my job I don'tlike...when the law is not in favor of my customer. But, I can only provide youinformation based on the law so that you can act on the best availableinformation to you. ...........I wish I had better news, but can only hope yourecognize and understand my predicament and don't shoot the messenger. I'msorry!
Thank you for an honest answer.
If i start another S corp under a new name with a different tax # XXXXX the same thing, will they be able to get that money.
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what can i do to protect myself if i signed a personal gurantee. it would seem that starting another company would not make a difference. Or would it?
Hi there. If you signed a personal guarantee, then you do have personal liability. But, there are some steps you can take. One, obviously you could file for bankruptcy protection which would allow you a fresh start and get these debts discharged. But, depending upon your asset base, this may not be appropriate for you. Two, although you can't transfer assets for less than fair market value because this would run afoul of the Uniform Fraudulent Transfer Act as an attempt to avoid creditors, what someone in your position might want to consider is putting your non-exempt assets (retirementincome and retirement account assets are exempt and can be left in place) into afamily limited partnership. Carefully drafted, this converts assets that acreditor would find attractive to go after into a limited partnership interestwith no control, no rights other than that of an assignment, notransferability, no marketability, and no right to distributions. The transferis for fair market value...i.e., you are simply exchanging one asset for anotherof equal value to you. And, you maintaincontrol through a general partnership interest that you control. Yet,when complete it essentially is an asset no one wants and thus the creditor isless likely to pursue the debtor. Familylimited partnerships must be carefully drafted and one would need an attorneyexperience in this area to do so, but they can be a very effective method ofasset protection.
i dont have any monetary assets. My house and car are upside down. My wife's name is XXXXX XXXXX anything. I don't know if they can come take household things like furniture and if it would even be worth it. I have some tools which i don't have any idea what they are worth, and a couple of work trailers each worth less than $3000. I thought that they would be able to come after the bank account of the new company if i signed a personal guarantee. would it be best to put the new company if my wife's name.
In this case, form the new company in your wife's name, and file bankruptcy for yourself. This will get these debts discharged and let you get a fresh start going forward. The items you mentioned are going to exempt and beyond the reach of the creditors.
we are holding off on bankruptcy till foreclosure since we will lose the house. My wife has some debts and was going to file bankruptcy as well. I want to make sure i am not wasting my time and money starting a new company if that account can be garnished.
I would suggest you file for bankruptcy now and include your home mortgage....that will eliminate your personal liability for the mortgage and then give you better leverage to deal with the bank on keeping your home. Once your personal liability for any deficiency is discharged, then the bank is motivated to deal with you rather than anyone else because if they make a deal with you, then don't have the costs of foreclosure or the risk of ownership and subsequent closing costs after they take ownership in foreclosure.
regardless whose name the new company is in can those funds be garnished for the new company from any personal creditors my wife or i have if we don't file bankruptcy? Some of the creditors have placed a lien on my house. will those go away if file bankruptcy and refinance to keep the house?
You have an unlimited homestead exemption in Florida so they can't do anything with your house. And, as long as your wife forms the new corp, if she is not a guarantor on any of the debt, then they will not have the right to go after your new corporation. But, you want to make sure she owns the shares as her sole and separate property. To insure that, whatever money she needs to put into the company to form it, do a Partition Agreement whereby you divide marital assets in half to allow her the funds as her sole and separate property to contribute for the ownership in this new entity.
is the partition agreement something that has to be filed with the clerk or do we just make it up and file it away? she has the money needed to start the new corp. i would not have to give her anything. Her name is not on the house and she is a stay at home mom so she doesn't have any income so the house would probably have to go in my name. My mother and father in law have offered to buy us a house and we pay them rent until we can get all this behind us and my business gets to a steady point. Do you think this is a better option than refinancing so we dont have anything in our name and we don't have to try and get a loan with bad credit? Would it be better if they formed a trust and put the house in the trust?
if my mother and father in law own the house should they put it in a trust?
They do not need to, but if they are not going to put it in your name, it would be helpful to do so just in case they were to die and have not addressed it in their will. If they do put it in a trust for your benefit, they need to make sure it's a spendthrift trust so it's beyond the reach of creditors.