What Is Business Bankruptcy?

Business bankruptcy

Small business bankruptcy happens. Sometimes small business firms don t make it. They fail financially for various reasons and find themselves faced with deciding if bankruptcy is necessary. Bankruptcy is a process you go through in federal court that is designed to help your business eliminate or repay its debt under the protection of the bankruptcy court. Business bankruptcies are usually described as either liquidations or reorganizations depending on the type of bankruptcy you take.

There are three types of bankruptcy that your business may file for depending on its business form. Sole proprietorships are legal extensions of the owner. The owner is responsible for all assets and liabilities of the firm. A sole proprietorship can take bankruptcy by filing for Chapter 7, Chapter 11, or Chapter 13. Corporations and partnerships are legal entities separate from their owners. As such, they can file for bankruptcy protection under Chapter 7 or Chapter 11.

Business Bankruptcy – Chapter 7

Chapter 7 bankruptcy may be the best choice when the business has no future. It is usually referred to as liquidation. It is usually used when the debts of the business are so overwhelming that restructuring them is not feasible. Chapter 7 is also appropriate when the business does not have any substantial assets. If a business is really just an extension of a particular owner s skills, it usually does not pay to reorganize it and Chapter 7 is appropriate.

Chapter 7 bankruptcy usually means that the business is over.

In Chapter 7 bankruptcy, a trustee is appointed by the bankruptcy court to take possession of the assets of the business and distribute them among the creditors. After the assets are distributed and the trustee is paid, a sole proprietor receives a discharge at the end of the case.

A discharge means that the owner of the business is released from any obligation for the debts. Partnerships and corporations do not receive a discharge.

Business Reorganization – Chapter 11

Chapter 11 is a better choice for businesses that may have a future. Chapter 11 is a plan where a company reorganizes and continues in business. It is reorganized under a court-appointed trustee. The owner of the company may actually be the trustee. The company files a plan of reorganization outlining how it will deal with its creditors. Creditors vote on the plan. If the court finds the plan is fair and equitable, they will approve the plan. Reorganization plans provide for payments to creditors over some period of time which may exceed twenty years. Chapter 11 bankruptcies are exceedingly complex and not all succeed. It usually takes over a year to confirm a plan.

Personal Bankruptcy – Chapter 13

Chapter 13 bankruptcy is a reorganization bankruptcy typically reserved for consumers, though it can be used for sole proprietorships. You file a repayment plan with the bankruptcy court detailing how you are going to repay your debts. The amount you will have to repay depends on how much you earn, how much you owe, and how much property you own.

If your personal assets are involved with your business assets, as they are if you own a sole proprietorship, you can avoid calamities such as losing your house if you file Chapter 13 versus Chapter 7.

Consult with a good business bankruptcy attorney before deciding on which type of bankruptcy you will file or whether you will file bankruptcy at all. There may be other options you should explore first.



Business Bankruptcy

Business bankruptcyIf you own a business in Arizona, and your creditors are closing in on your business, you need to contact Thomas Law Office as soon as possible to meet with Mr. Thomas and obtain answers to your questions about bankruptcy. The bankruptcy options for your business include chapter 7 and chapter 11. These will be discussed at length during your first visit with Mr. Thomas. Bankruptcy protection for businesses usually is a more complicated process than it is for individuals. Mr. Thomas has handled numerous business bankruptcy cases and can navigate your business through the bankruptcy process.

Phoenix Small Business Bankruptcy Lawyers

Chapter 11 is used when the business is seeking to reorganize its debts and emerge from the bankruptcy process as a healthy, viable company. Chapter 7, on the other hand, is a bankruptcy alternative for the company that wishes to cease operations and turn over the finalization process to the Arizona bankruptcy court. There are often advantages of proceeding in this organized manner rather than permitting the business’ creditors to engage in a feeding frenzy, like a bunch of piranha devouring its prey. Declaring bankruptcy can be a way to obtain tax benefits and other advantages that may not be available if the owners opt not to file for bankruptcy protection.

Often a corporate bankruptcy for a small Arizona business is filed in conjunction with a personal bankruptcy by its owners, typically because the businesses debts may have been guaranteed by the owners of the Arizona business.

Contact Our Arizona Bankruptcy Lawyers

It is important that you contact the bankruptcy law firm of Thomas Law Office to assist you with your Arizona small business bankruptcy. Even if you merely want to find out answers to your questions about bankruptcy options rather than file for bankruptcy protection in the Arizona bankruptcy court, talk to our bankruptcy lawyers today before you face unintended consequences of waiting too long to obtain appropriate bankruptcy information.



Tax Information For Businesses

Small Business and Self-Employed Tax Center

Access to tax information useful to small businesses with assets of $10 million or less.

Large Business and International Tax Center

This page provides links which are helpful for large to mid-size businesses with assets greater than $10 million

LB I Compliance Campaigns

LB I launches Compliance Campaigns. Campaigns will ensure that resources are used efficiently and effectively to improve taxpayer compliance. LB I’s goal is to improve return selection, identify issues representing the risk of non-compliance, and make the greatest use of limited resources.

Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) provides an incentive to hire individuals from targeted groups. The legislative changes under the Tax Increase Prevention Act of 2014, retroactively allow taxable employers to claim the WOTC for all of the targeted group employee categories listed on Form 5884, if they began work after Dec. 31, 2013, and before Jan. 1, 2015.

Effect of Sequestration on the Alternative Minimum Tax Credit for Corporations

The Balanced Budget and Emergency Deficit Reduction Act of 1985, as amended, requires certain spending cuts during Fiscal Year 2017 due to the sequester triggered earlier this year.

Self-Employed Individuals Tax Center

The basics on your tax responsibilities if you are self-employed or an independent contractor.

IRS Video Portal

The IRS Video portal contains video and audio presentations on topics of interest to small businesses, individuals and tax professionals. You will find video clips of tax topics, and archived versions of live panel discussions and webinars.

Employment Taxes

Federal income tax, Social Security and Medicare taxes, FUTA, self-employment tax and more.

Disaster Assistance and Emergency Relief for Individuals and Businesses

Special tax law provisions may help taxpayers and businesses recover financially from a disaster.

Small Business Forms and Publications

Download multiple small business and self-employed forms and publications.

e-file for Large Business and International (LB I)

Certain large business and International (LB I) corporations are required to electronically file their Forms 1120 and 1120S. Other corporations may do so voluntarily. This site provides e-file information for corporations that prepare and transmit their own electronic corporate income tax returns and those that use the services of third party tax professionals.

Employer ID Numbers

Find out more on EINs or apply for one online.

Employee Tool Equipment Plans

The Internal Revenue Service has established a compliance team to address the marketing and mistreatment of employee tool and equipment plans as tax-favored accountable plans.

Deducting Business Expenses

Find out what qualifies as a deductible business expense, including depreciation.

IRS Tax Calendar for Businesses and Self-Employed

The tax calendar is available for downloading and printing, or you can view it online.

EFTPS: The Electronic Federal Tax Payment System

Electronic Federal Tax Payment System (EFTPS). Free from the US Treasury.

Form 2290 e-file

Approved 2290 e-file providers.

U.S. Citizens and Resident Aliens Abroad

This section covers tax topics for U.S. citizens or resident aliens living overseas.

Excise Tax

Information about the various programs, databases, and activities within Excise Tax.

Industry Issue Resolution Program

The Industry Issue Resolution (IIR) Program resolves frequently disputed or burdensome tax issues. IRS solicits suggestions for issues for the program from taxpayers, representatives and associations.

Estate and Gift Taxes

General information on when these taxes apply and when they do not.

Filing Past Due Tax Returns

Understand how to file past due returns.

Information Returns Processing

The Information Reporting Program Website is designed to help you meet your Information Reporting Requirements. Included are help-line telephone numbers and direct links to aid you in reporting information returns. You will also find information about how to file returns electronically or magnetically.

LB I Directives

LB I Directives provide industry-related and administrative guidance to LB I examiners to ensure consistent tax administration. The Directives do not establish Service position on legal issues and are not legal guidance.

Online Ordering for Information Returns and Employer Returns

Order information returns and employer returns online.

Manufacturers’ Energy Efficient Appliance Credit

Act Section 305 – Modifications of Energy Efficient Appliance Credit for Appliances Produced After 2007

Audit Techniques Guides (ATGs)

These guides contain examination techniques to assist examiners in performing examinations.

Plug-In Electric Drive Vehicle Credit (IRC 30D)

Plug-In Electric Drive Vehicle Credit (IRC 30D) – Internal Revenue Code Section 30D provides a credit for Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks.

Your Guide to an IRS Small Business Audit

Video series shows small business owners steps of an audit and answers questions about the process

Income from Abroad is Taxable

There have been recent reports about the interest of the Internal Revenue Service (IRS) in taxpayers with bank accounts in Liechtenstein. The IRS’ interest, however, extends beyond bank accounts in Liechtenstein to financial accounts anywhere in the world. The IRS reminds you to report your worldwide income on your U.S. tax return and lists the possible consequences of hiding income overseas.

Quality Examination Process

The Quality Examination Process (QEP) is a systematic approach for engaging and involving Large Business and International (LB I) taxpayers in the tax examination process, from the earliest planning stages through resolution of all issues and completion of the case.

Market Segment Understandings (MSU)

The IRS and taxpayers in particular market segments, work together to improve tax compliance.

Railroad Retirement Tax Act (RRTA) Desk Guide (January 2009)

This Desk Reference Guide is intended as a resource tool to assist Revenue Agents who are assigned the examination of a railroad employer. The Guide was prepared presuming that the reader has already received employment tax training.

Federal Payment Levy Program

Certain federal payments (OPM, SSA, federal employee salaries, and federal employee travel) disbursed by the Department of the Treasury, Bureau of Fiscal Service (BFS) may be subject to a 15 percent levy through the Federal Payment Levy Program (FPLP) to pay your delinquent tax debt. Find out your appeal rights and how to resolve any dispute.

Research Credit

Guidelines and audit technique guide are provided for field examiners on the examination of Research Credit cases.

The International Tax Gap

Find resources on this page pertaining to the international tax gap — the difference between the amount of tax that taxpayers should pay and the amount that is paid voluntarily and on time. The tax gap can also be thought of as the sum of non-compliance with the tax law.

Uncertain Tax Positions – Schedule UTP

IRS finalized Schedule UTP instructions for reporting uncertain tax positions by certain corporations.

IRS Non-Retaliation Policy

IRS has a zero-tolerance policy for retaliation and has had one in place since 1998.

Educating Your Employees About Tax Compliance

These products may help employees with their tax responsibilities.



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