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“Automatic stay” items?
- Stops garnishment, liens, collection abuse
- Does not stop Criminal prosecutions, paternity suits, child support cases
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Which Chapter 7 + 11 companies cannot file?
NORIBS - Cannot file Chapter 7:
NO
Railroads
Insurance companies
Banks
Savings Institutions
NOBIBS - Cannot file Chapter 11:
NO
Brokers
Insurance companies
Banks
Savings Institutions
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What are the requirements for creditors for filing in a bankruptcy?
FOR CHAPTER 7 AND 11
Creditors must be owed at least $18,600 in unsecured debt.
* If <12 creditors, then any creditor owed >$18,600 can file.
* If >12 creditors, then at least three creditors owed $18,600
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What are the bankruptcy chapters?
Chapter 7 - Liquidation (IPC):
- Liquidates assets to pay off
- appointee
- Must have lower income than means test, if not convert to 13
Chapter 11 (IPC) - No appointee, no liquidation, new debt structure
Chapter 13 (I)- Adjustment to debts of individuals
- appointee
- Debtor pays off debt in 3–5-year period
- At end, remaining debts are discharged
Chapter 9 - Municipal Debt Adjustment
Chapter 12 - Family farmers with regular income
Chapter 15 - Ancillary and cross-border cases
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What are the bankruptcy chapters, and which are voluntary and involuntary?
Chapter 7 - Liquidation (IPC): Trustee appointed
-either vol or invol.
Chapter 11 (IPC) - No appointee, no liquidation, new debt structure,
-either vol or invol.
Chapter 13 (I)- Adjustment to debts of individuals,
-Only vol
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Exceptions to dicharge (WAFTED):
Willful and malicious injury
Alimony
Fraud
Taxes
Educational loans
Debts undisclosed in bankruptcy
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What are EE and ER taxes?
Employer taxes
1. FICA (SS and Medicare)
2. FUTA (Unemployment)
3. Workers’ Comp
Employee
1. FICA (SS and Medicare)
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C Corporation
● Must file articles of incorporation.
● Owners not liable beyond investment.
● Managed by a board of directors.
● Owners can freely transfer ownership.
● Income taxed at corporate level and a 2nd time when given as dividend.
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General Partnership
● 2+ Partners
● No formal formation
● Unlimited Liability
● Owners can’t sell business without unanimous consent
● Pass-through taxation
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Limited Liability Company (LLC)
● Must file with the state to register.
● Can have just one member.
● Certificate of Formation (required) (filed with the state).
● Operating Agreement (optional) - used to govern the LLC.
● If one member, default tax status is disregarded entity (Schedule C).
● If 2+ members, default tax status is partnership.
● Owners = Members
● Members not liable beyond investment.
● Owners can’t sell business without unanimous consent
● Pass-through taxation
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Limited Liability Partnership (LLP)
● Must file with the state to register
● Partners not liable for partnership obligations
● Owners can’t sell business without unanimous consent
● Pass-through taxation
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Limited Partnership (LP)
● Must have at least 1 general partner and 1 limited partner.
● Must file with the state to register.
● General partner: unlimited personal liability.
● Limited partner: only investment is at risk.
● Owners can’t sell business without unanimous consent.
● Pass-through taxation.
● General partners owe fiduciary duty to partnership.
● Limited partners do not owe fiduciary duty to partnership.
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S Corporation
● Once registered as a C Corporation, elect to become an S Corporation.
● Owners not liable beyond investment.
● Owners can freely transfer ownership (domestically).
● Pass-through taxation
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Sole Proprietorship
● No formation
● Unlimited Liability
● Owner can sell business at will
● No business return
● Reported on Schedule C
● Pass-through taxation
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Reasons to inspect books and records as a shareholder?
- To commence a stockholder’s derivative suit.
- To solicit stockholders to vote for a change in the board of directors.
- To investigate possible management misconduct.
