RSSCustomer list can be taken in bankruptcy
Jan 06
He has about $500 in receivables. Essentially he rents an office to tutor kids on taking the SAT’s. There is no inventory, assets etc. Throughout the year he will gross about $180K but after expenses, he takes home $60K. I was worried that the trustee would come in and essentially take over or at least become his “partner” during the bankruptcy. I don’t want anything to happen to his LLC in this bankruptcy. Honestly, there is no liquidation value based on what he does. Without hard assets, it is unlikely the business has a liquidation value. However, be careful of receivables, bank accounts, licenses, pattens, copyrights, trademarks, contracts, etc. You’ll need to be comfortable that the business itself is not marketable. Would anyone buy this business from your client? For most modest 1 person operations without equipment, the answer is normally no and you don’t have much to worry about. If you have any doubts, contact a business realtor or appraiser. If your Trustee is on the ball, s/he will want $3000 simply as a nuisance value. A competitor of your client would almost certainly be willing to pay $3000 to your Trustee to purchase the LLC, and then shut it down, or, take over the client list. Just because there are no assets or no receivables does not mean there is no value to the business, from the Trustee’s perspective. I know that my trustee would not pursue such an asset unless there is a higher payday (or if it is that small, it better be a very easy payday). That’s why you need to talk to your client/realtor/broker about the marketability of the business – is there something that can be sold. Obviously it helps to know your bankruptcy trustees. Obviously any debts of the LLC and the ability for the debtor to open a competing business the next day is going to reduce what anyone is going to pay for a list of clients.
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