Expert: Ed McFarland - 11/8/2006

Question
I am an officer (COO) in our C Corp.  We ran short and reduced our payroll beginning in June from $5K semi-monthly to $364 semi-monthly.  Now the company is going out of business. Can we show the deferred payroll as a liability?  How can I get my money out of the business as I have stepped to arms length?

Answer
Yes the deferred payroll is a liability. Now is the company going into reorganization or liquidation?

Generally in these cases payroll and taxes are at the head of the line before the secured note holders when it comes to liquidation. But given how it was set up, you also could end up being classified as an unsecured creditor.

Given how much might be at stake, you may want to look into some professional advice. It is possible that you could get your past due salary before the closure, but if it is deferred comp or equity, it may not be possible.

Good luck.