Filing Bankruptcy on an S-Corporation
Savannah Bankruptcy Lawyers
Corporations are classified into S corporations and C corporations by the IRS. S corporations are usually exempted from paying federal corporate income taxes on bankruptcy filing. But they have to continue to pay their tax returns. S corporations have to be very careful and should take extra precautions in order to protect their shareholders when they file for bankruptcy. This is because, share holders can be held personally liable for the debts incurred by the corporation.
Filing for bankruptcy on an S corporation follows similar procedure as in normal commercial bankruptcies. But there are certain steps in addition in an S-Corp bankruptcy. The first step is to take legal advice on the matter and for this, hire services of an experienced, reputed and competent bankruptcy attorney. In consultation with attorney and financial professionals of the corporation, time to file for bankruptcy has to be determined. Chapter 11 is the most preferable form of bankruptcy to file for since the S Corp can continue to operate during and after bankruptcy. Chapter 7 bankruptcy would see the sale of all assets and dissolution of the corporation. But remaining eligible for chapter 11 is an important aspect since, if condition of the Corporation deteriorates to a great extent, chapter 7 might be the only option available.
The S-Corp can choose the bankruptcy court in which to file the bankruptcy petition. There are two choices; the bankruptcy petition can be filed in the federal bankruptcy court in the judicial district which should include the corporations’ main office or else, the petition can be filed in the state where business has been incorporated. The bankruptcy petition for a chapter 11 bankruptcy can be downloaded from the website of bankruptcy court of your choice. There would be other forms too, that would have to be downloaded and filled in to be submitted along with bankruptcy petition.
There would be requirement for other documentations like corporation’s tax returns for three years or the IRS Form 1120, tax returns for 3 years of all shareholders involved in management or Form 1040, list of all creditors and debts, documents providing proof of debts owed by corporation, the Articles of Incorporation and Corporate Bylaws, financial statements of previous three years of corporation and the IRS Form 2553 which is the corporation’s S Corporation filing.
All the petition forms and accompanying documentations have to be authentic and accurate. The forms would have to be supplied with detailed information with regard to creditors and financial situation of corporation. The petition has to be filed with the bankruptcy court clerk. A reorganization plan has to be constructed and running of corporation has to be continued to pay out the creditors. The court supervised payment of creditors would result in corporation being out of debt in couple of years.
Contact a seasoned bankruptcy attorney in Savannah if you need debt relief assistance or want to file bankruptcy.
