Last week, you covered the
steps that an agency owner should take before closing the firm.
Now, would you cover the post-closing steps needed to minimize
liability?
A: First, let me dispel a common myth about
going out of business. Many owners believe it is smart to dissolve
their corporations; i.e., to file a paper with the secretary of
state that terminates the existence of the corporation.
Not only does dissolution not affect your existing liabilities
but it also may make it easier for creditors to sue you
personally.
Therefore, keep the corporation in existence until all claims
are settled and all taxes paid. Keep your bank accounts open and
fund them as needed to pay your corporation's continuing
obligations.
Second, make sure you continue to file ARC sales reports as long
as necessary to pay for all tickets. If you stop filing before you
report all tickets sold, you may be sued by ARC personally for
ticketing fraud.
Third, work with ARC to get the return of your bond or letter of
credit. Most agencies have bonds, and you probably will not get any
collateral back from the bonding company for six months after you
close.
If you gave ARC a letter of credit, ARC will not release it for
100 days after you close, so don't count on the release of any
collateral held by your bank until after that time.
Fourth, be sure to file all corporate tax returns for the year
during which you closed. If you close Jan. 15, you'll need to file
2003 tax returns in 2004, so keep your books and records.
Fifth, regarding your less-important contracts -- like ad
contracts and equipment leases -- decide whether to continue to pay
the installments.
If you cooperate with these creditors, you can probably persuade
them to settle for very little, and then they will not turn your
debts over to a collection agency to hound you.
Finally, if there are any remaining debts that are personally
guaranteed, such as an office lease, and if the creditors are
convinced that you have enough money to pay the debts, consult a
bankruptcy lawyer about ways to get rid of these debts.
You probably should not file for bankruptcy if you have a small
number of such debts, but the lawyer can help you settle them for
amounts you can afford.
Mark Pestronk is a Fairfax, Va.-based attorney specializing
in travel law. He answers your questions in the TravelWeekly.com Legal Ease forum.
To contact Mark directly, e-mail him at [email protected]