Margaret CPA in OH Posted July 6, 2009 Report Share Posted July 6, 2009 A client is giving up. He has had no new bids accepted in weeks and has significant outstanding credit card debt and owes on 2 trucks. I expect the trucks will be repossessed. The only other assets are a computer and printer. He is a sole shareowner and has no basis any longer. His wife is quite worried about potential claims on personal assets despite the corporate status. They do own rental property together but she owns her own business and building. Quickfinders states the "The courts may disregard the so-called "corporate liability shield" in the case of single shareholder corporations." This seeems cause for concern. What are the next steps for him to take? I assume engaging an attorney but he has no money to pay. Fortunately he has kept up with payroll taxes because we handle it for him. And he owes me just a small amount. The major debt is nearly $100,000 to credit card companies. Several years ago, after an IRS audit when he became a client, I convinced him to incorporate to protect assets. Wife was 50% shareholder initially but, as she saw debt mounting, sold out a couple of years ago to him. Any guidance will be appreciated. I've only had one other client this bad but that was about 3 years after I "fired" her for nonpayment. Sadly, I have another teetering on the brink. And they stubbornly refused to be bought out 5 years ago for a couple of million... Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted July 6, 2009 Report Share Posted July 6, 2009 My guess is those CC are personally guaranteed. If he can't pay them, they will be able to come after his personal assets. If her business is in a corporation or LLC, there may be some protection from credit card companies. This is the time for a lawyer. You should not be giving this kind of advice. Limit your work to bookkeeping and taxes. You did not acquire the debt, it is not your issue to get them out of it. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
JohnH Posted July 6, 2009 Report Share Posted July 6, 2009 Good advice from Tom. Your best course of action is to stay out of it - maybe he thinks he can't afford it, but in this situation he can't afford NOT to see a lawyer. Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted July 6, 2009 Author Report Share Posted July 6, 2009 Thanks, Tom. I appreciate the quick reply. You may have misread my intentions, however. The ONLY advice I would give would be to see an attorney or other next steps such as contacting the state for dissolution. I don't understand what "kind of advice" you are assuming that I am giving besides to contact an attorney. I suspect that although the cc's are in the corporate name, he would be personally liable. The rental property is an LLC but she/wife's business is not incorporated. I encouraged her to at least form an LLC but, as an insurance agent, she said she was not permitted to do so by Allstate. That may or may not be the case; as I am not an attorney, I did not question her personal research on that issue and let it go. The wife was, I believe, asking about what sorts of things to expect as she is very concerned about her business. This is a second marriage; he was barely scraping by from the beginning and things obviously have just further deteriorated. She seriously considered divorce a couple of years ago. Maybe she should have done so. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted July 9, 2009 Report Share Posted July 9, 2009 Let the bankruptcy attorney be the one to advise them at this point. Just direct them to a good one, or at least, away from any known bad ones. They need to look into all the options before they do anything, as the wrong step at this point could close out a better option. Remind them that if they were injured and bleeding badly, they would not say the could not afford to see a doctor. Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted July 9, 2009 Author Report Share Posted July 9, 2009 Thanks, KC, that's a very good point. Unfortunately, I don't know any bankruptcy attorneys, good or bad. We'll see what happens. Unfortunately I think he is more concerned about keeping his son, an employer, earning money than watching out for himself. He tells his wife that he can't quit until the trucks are paid for (one that his son drives). Oh, it's a long story..... Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted July 9, 2009 Report Share Posted July 9, 2009 Well, clients who operate their business on emotion rather than good business judgement seldom come out well. It's fine to use emotion with family, but not to make business decisions. So don't let yourself be pulled into the middle of this one. Just advise them that they need to talk to an attorney [check on the Martindale-Hubbell site for those who specialize in bankruptcy in your area, and give them a printout of the names, perhaps. http://www.martindale.com/ Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted July 9, 2009 Author Report Share Posted July 9, 2009 I agree about the emotion aspect. This is a serious case, too. The link is a good one and I will forward it. There are over 100 names so a printout isn't a great idea. They also are on the county line so may choose someone closer to their home rather than center city. Thanks again for your excellent, as ever, advice! Quote Link to comment Share on other sites More sharing options...
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