Bankruptcy can be a difficult decision for any small business. There are a number of consequences associated with bankruptcy, including tax consequences that you may need to consider. For more help on the tax issues involved, I would suggest you consult with a small business tax attorney, Samuel D. Brotman or a lawyer within your own jurisdiction to help you mitigate any potential legal problems with the IRS. However, when evaluating whether or not it is time for your small business to file bankruptcy, before you hire an attorney, it is important to know exactly what the requirements for bankruptcy are and how they impact you. These requirements differ slightly when a small business owner files for bankruptcy vs. a regular Chapter 7 or Chapter 13 debtor.
Here are some examples of how small business cases In small business owner cases, if the court makes the finding that there is enough information about the business in the reorganization plan then the debtor may not be required to file an additional disclosure statement related to the business. Also, to determine the classification of small business debtor, the debtor must pass a two-part test. The first part of the test requires that the small business debtor be participating in actual commercial activity. This means that the small business cannot be dedicated to passive income, such as owning real property. In addition, it is required that any liquidated debts, whether secured by a fixture or UCC filing or otherwise unsecured, must not exceed approximately $2,343,300. The second part of this test does not have to do with the business at all, but rather the creditors’ committee. If the creditors committee has already been appointed or if that committee is not active enough, in the court’s eyes to provide sufficient supervision of the debtor, than it will fail that part of the test. A qualified tax attorney or bankruptcy attorney can help explain the nuances of the test to your small business. Read more