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  1. #1
    Join Date
    Aug 2017
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    2

    Default Starting a Business During Chapter 13 Bankruptcy

    My question involves bankruptcy in the state of: NJ
    I'm currently in a Chapter 13 plan and making my payments without issue. I receive royalty income from copyrights I own and also have an LLC business (sole proprietor) which generates a small amount of income from online services. These were both used to calculate my payments since I claim the LLC on personal return (disregarded entity). This was strictly a personal bankruptcy. I did not discharge any debt from my business, but they did use the profits from that business as income for calculations.
    I have another non-active LLC that is taxed as C Corp (separate from my personal income), which the court is aware of, but that was not used to calculate my income. A couple questions:
    Can I do business under the existing LLC C Corp? If I do, will I need to report profit/loss to the trustee? Or does it remain a separate entity as it was when I filed, as it is for tax purposes?
    Am I better off starting a new C Corp? Is there any issue with me starting another business as an LLC C-Corp?

  2. #2
    Join Date
    Sep 2010
    Posts
    16,425

    Default Re: Starting a Business During Chapter 13

    You change your job or start a new business (even if it is a corporation or LLC) you should report it. If you have an attorney, allow him to handle it (why you aren't asking him instead of poking around here in that case I do not know). If you did this without an attorney, notify the trustee. The trustee may wish to petitition the court to change the plan in light of you changing the situation. Understand the trustee represents the creditors that you're screwing over, not your interests. It makes no real difference if you work as a sole proprietor, dredge up some dormant LLC/Corporation you have, or create a new one.

  3. #3
    Join Date
    Aug 2017
    Posts
    2

    Default Re: Starting a Business During Chapter 13

    Quote Quoting flyingron
    View Post
    You change your job or start a new business (even if it is a corporation or LLC) you should report it. If you have an attorney, allow him to handle it (why you aren't asking him instead of poking around here in that case I do not know). If you did this without an attorney, notify the trustee. The trustee may wish to petitition the court to change the plan in light of you changing the situation. Understand the trustee represents the creditors that you're screwing over, not your interests. It makes no real difference if you work as a sole proprietor, dredge up some dormant LLC/Corporation you have, or create a new one.
    Thanks for the reply.
    I'm asking here in the Expert Law forum because I prefer to do as much research as possible and be prepared before I bring an issue to my attorney. If it's something that can't be done or will be more trouble than it's worth, I'd rather not waste my money and my lawyer's time by scheduling a meeting to discuss it.

    If anyone knows if it is allowable to start another business, specifically a c corp as a separate tax entity where I would be paid a salary, I would appreciate discusion on the pros/cons of that.
    I am aware that I need to report my income, as I intend to do. My current active LLC is taxed as a pass-through entity and the profits are entirely taxed under my personal taxes. A c corp is not. I have questions regarding if I am required to report profit/loss of a c corp, which is a separate tax entity and would not be part of my income.

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