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Ask Brent Blanchard Your Own Question
Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1975
Experience:  Twelve years experience in all aspects of debtor & creditor BK.
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I am a owner of a S-Corp, my former accountant got me into

Customer Question

I am a owner of a S-Corp, my former accountant got me into a lot a problem with the IRS, State, banks, etc. I owe to a lot of people and I am broke. My bussines is going slow but is going. My question, hould I dissolve this S-Corp to stop all this mess under bankrupcy, and to open a new (fresh with no problems) S-Corp?
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  Brent Blanchard replied 7 years ago.
Thank you for your question.

In general terms, a floundering business can be dissolved and its owner(s) are still free to open a new business.

If bankruptcy is part of the winding-down process for the business, don't expect BK to do more than it can. IRS Trust Fund (withholding) taxes don't vanish that way--the corporate officer who did the deeds of non-payment will get personal liability for those types of taxes. They are difficult to escape, even with personal BK for the corporate officer, and cannot be discharged anyway if they are too new.

One must also be very careful about transfer of business assets from a failed business to a new business. Once the decision is made to "wind down" at business, its officers get saddled with an almost-fiduciary duty to gather all of the company's assets and liquidate them for fair market value so the creditors can be paid in full if possible, which would then leave spare money to distribute to the shareholders (they are last in line). Taking personal control of valuable assets, leaving creditors unpaid, and then using those same valuable assets to open a new business can get a person in trouble.

Good accountants carry errors and omissions insurance. A good corporate customer will investigate whether there is a claim against an accountant. Personal consultation with an experienced business and tax attorney is in order, so a definitive answer based on all facts and documents can be given.

Thank you.

Customer: replied 7 years ago.
So, can I open the new bussines in the mean time that I close the other one? Because closing will take some time, and I am the only share holder of it.
Expert:  Brent Blanchard replied 7 years ago.

Entrepreneurs often have multiple businesses open at the same time.

It would be a good idea to check for personal guarantees on any business debts, and become familiar with the rules on prohibited transactions that could be interpreted as being intended to "hinder, delay and defraud" creditors. The Uniform Fraudulent Transfers Act would be a good place to start.

Thank you.