A few years ago I was running my business as a sole proprietor...(Big mistake) The bank repo'd my truck and trailer and I went out of business. Its been since Jan/2010 since this happened. I have another truck and trailer now and am forming a LLC to run the business as a seperate entity. Im thinking of filing bankruptcy within a year. (personal bankruptcy) Can that effect my LLC since it is a seperate entity? I havent formed it yet and need to know how to form it to protect it from being effected. The LLC would be debt free.
What if the LLC had partners...The truck and trailer are not even titled or liscensed yet? So transferring it is not a issue. It will be the first time they will be liscensed in the LLc or our namesfor that matter.Setting it up as a partnership, especially in Illinois would keep it from being taken over by a trustee correct?
Yes, the LLC is problematic on several fronts based on the situation you described.
1. If you transfer the truck and trailer to the LLC, the bankruptcy court will view it as a fraudulent conveyance and the trustee will simply go get the items. No different than the guy that transfers his motorcycle to his buddy in hopes the bankruptcy trustee won't find out (the trustee invariably finds out).
2. Presumably, you would the be "the owner" of the LLC. As such, as to you personally, your ownership interest in the LLC is an asset. No different than if you owned stock in Apple, the trustee can sell those Apple shares (assuming no exemption). The trustee can take control of that asset and do whatever you could do with it (e.g. liquidate the business).
The full explanation as to why what you are planning is huge problem is beyond the scope of this forum. Sounds like you need some real bankruptcy planning. Go get a quality bankruptcy lawyer to help you navigate your land mines and come up with the best solution to your situation.
I can't stress this enough, you need to get with a lawyer. There IS a solution to your problem (most likely you will file BK BEFORE you form the LLC), but only a lawyer in your area that is competent can really help you.
As the other person has mentioned, transferring the truck and trailer to a LLC is problematic from a fraudulent transfer standpoint. Also, your membership interest in a single-member LLC would be an asset of your BK estate. The trustee should be able to step into your shoes as a member and sell the LLC assets.
You need to consult a lawyer and discuss your options now. It is highly likely there is a solution leaving things as they are. If you live in the truck then you could perhaps claim a homestead exemption in your truck
This is general advice based on limited interaction in an online forum. The reply does NOT create an attorney-client relationship. You are strongly advised to seek the advice of an attorney in your jurisdiction after you have presented them with all of the facts.
Attorney Berkus is spot on. My only comment is that you cannot be entering into a "partnership" knowing you are adversely affecting your partners....called bad faith and a violation of the covenant of good faith and fair dealing imbedded into any contracts (your partnership agmt being a contract ...or operating agreement if you form an LLC instead). To the extent you crafted a good Operating Agreement seeking to deprive your creditors then the shuffling of assets to partners to protect you (especially if they are admittedly complicit in your plan) will not stand under "fraudulent conveyance" claims. I am not saying you cannot do something.....just that you need competent counsel to helps improve your planning and implementation of this...as attorney Berkus spoke to.
My answer is not intended to be giving legal advice and this topic can be a complex area where the advice of a licensed attorney in your State should be obtained.