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Question
Here's my situation. I run a computer consulting business. Nominally, I have it incorporated but as the sole stock-holder I essentially run it as a sole prop. It's getting to be quite a headache to keep the books and deal with all the extra paperwork and I would rather just close it down.
The rub in the situation is that most of the loans (LOCs) that I could tap are in the name of the business, with personal guarantees. I really don't want to lose that source of funding. I called and asked my lenders if they would switch those business lines to personal lines and they refused.
I read through all the legal stuff and as far as I can see the only limiting factor on the LOCs is that they must be used for legitimate business purposes, which they will be.
So my question is simple. If I close the corporation down but still use the LOCs for business purposes (as a sole prop) is that some type of misrepresentation. What are my legal duties to the lender? As I see it, I am on the hook personally either way, so what difference does it make. But I don't know if they or the law looks at it the same way.
Daniel:
Thank you for your question. First let me begin by stating that I am not an attorney, and unable to offer legal advice or reference/interpret laws pertaining to your rights or obligations regarding contracts. That said, I know it is common for business owners from time to time to dissolve S or C corps, due to costs, etc. and maintain their businesses (usually on a smaller scale) as a Sole Proprietor or DBA, which is defined as a business entity. As long as you are compliant with your states laws and are licensed and registered as such, it would seem that as long as you remain in good standing with your lenders that would be legitimate. You can consult for free with the Small Business Administration, or any number of local branches of S.C.O.R.E. visit www.score.org or even your local chamber of commerce to help you understand the proper measures to alter your business entity/model. If you simply don't know where to begin, I highly recommend you spend the money and consult with an attorney who specializes in business transactions. If you found this answer helpful, please take a moment to provide favorable rating to enable others to benefit as well.
Respectfully,
Christine Janklow
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| Rating(1-10) | Knowledgeability = 10 | Clarity of Response = 10 | Politeness = 10 |
| Comment | Thanks for this answer. I did realize you couldn't give legal advice on contracts but your answer is nonetheless reassuring. It's good to know I am not the only one that has faced this situation. I am also glad that your provided follow-up steps and resources. That's professional. Thanks. | ||
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Answers by Expert:
Christine Janklow
Expertise
As President of SettleSource,Inc. a business debt settlement firm, I invite you to inquire about all aspects of business debt solutions to best determine which may be most appropriate. If you have questions such as: What is debt settlement and how process provide debt relief to my business? What options are available to deal with my business debts? Is it possible for a business owner to negotiate their own settlements? Why is debt settlement preferable to filing a bankruptcy or debt consolidation? Why are creditors willing to provide settlements to a business? How will settling debts affect credit scores? or How to rebuild a business after debt is eliminated. Please ask it now! For more information regarding how debt settlement can help your business, please visit www.SettleSource.com and place your inquiry. Mention All Experts to have a confidential no cost consultation with Christine. If this is your business situation time may play a very important factor in getting matters resolved proactively before they have negative affects on the business.
Experience
My expertise is specific to providing business solutions that will have profound positive impacts on the financial health of businesses. I have 25 years experience as an entrepreneur and have developed national sales programs; strategic alliances; product development; marketing programs; business and turnaround plans and debt settlement programs all providing methods to improve the financial outlook for large and small businesses. In the area of commercial debt settlement I have over 10 years experience working with large and medium corporations and closely held businesses to enable successful debt reduction and turnaround. I am a professional debt arbitrator and have negotiated with major banking institutions as well as vendors, suppliers and other trade creditors.
Organizations
Provisors;Turnaround Management Association; Los Angeles area
Publications
Accounting Today; Web CPA; National Restauarant Association;Los Angeles Daily News; Today Magazine Monthly series of business articles entitled "Brand News."
Education/Credentials
Bachelor of Business Administration; Associate of Arts Merchandising
Past/Present Clients
American Airlines, American Express, Safeway Inc., New York Life, consumer products manufacturers; retailers, food service industry and other small businesses and service providers.
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