In most Las Vegas bankruptcies, people’s assets and debts are typical to households: a house, its mortgage(s), cars, auto loans, credit card debt, personal property.
But one thing people may not know how to value is their business. This is important because a business must be listed as property you own, regardless of its corporate structure. In other words, even if it is a separate corporation whose stock is closely held (not traded on an exchange), bankruptcy petitioners must list the shares, and their value will equal that of the business anyway. Moreover, the business may file for bankruptcy in its own right.
The Chapter 7 federal exemptions are not that high for small business assets (up to $11,000), which are included with other private property such as bank account balances. The Trustee is allowed to liquidate the rest of the business to satisfy creditors, and he or she will do so. Because personal property is not liquidated in Chapter 13, small business owners may want to consider that chapter over Chapter 7.
So if you are filling out the petition, how do you assign a dollar value to your small business?
(1) What is your business’s corporate structure? If it’s unincorporated, you are a sole proprietor and the assets are your personal property. If it’s a corporation or some other kind of entity, you will have to list the stock and calculate its value.
(2) Does your small business have any assets outside of yourself? This often happens when people’s work is the sole value of their business. For example, someone who owns a barber shop only needs lease for space, licensing, and some supplies. Other people may be merely selling items on eBay or operating another online business.
(3) If your business does have assets like a limousine for a limo company, then you must draft a balance sheet listing these assets at the price the business paid for them.
(4) Omit any calculations used for tax purposes, e.g., depreciation, because bankruptcy uses the “book value” of a business’s assets not the market value.
(5) Include the balance sheet on your petition.
(6) If the business is filing bankruptcy, it must submit its own petition.
If you are a small business owner contemplating bankruptcy, it’s generally a good idea to seek an experienced Las Vegas bankruptcy attorney’s counsel to determine which Chapter is best for you.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Freedom Law Firm Las Vegas bankruptcy attorney for a free initial consultation.