Corporate Restructuring

What Is the Corporate Restructuring Strategy?

If you own a Corporation (or a Limited Liability Company that has elected to be treated as a corporation) that owes back IRS tax liabilities, you may be able to eliminate a significant portion of your business tax debt by closing your current corporation and having our Tax Attorney negotiate a certificate of discharge of Federal Tax Lien.

This business restructuring strategy is one of the most powerful tools for eliminating tax debt, but it is also one of the most complex. This is no walk in the park, but the higher your debt and the lower your assets, the more savings we can show you.

What Are the Risks Involved?

The absolutely most important factor is that the government approves of the plan BEFORE you start. If you do not get their approval, you could face fraud charges, but in the very least you could be subject to a nominee, transferee, or alter-ego tax lien. If this happened then the business purchasing the assets could be assessed the old corporation's tax liability.

The company purchasing the old corporate assets must be fundamentally different. The IRS will look for "badges of fraud":

• Transfer of assets lacks fair consideration: If you are going to transfer any assets, they must be transferred at a fair price. You cannot give assets away to anyone.
• The transfer is to a closely related person: Transfers to family members or other shareholders are seen as inside trades and raise suspicion.
• The transferor retains enjoyment, possession or control: If you sell your truck to a friend but still drive it, that raises suspicion.
• The transfer was concealed: If the transfer is not made in the usual manner, the government will question it.
• The transferor was sued or threatened with a suit: Trying to hide assets after being threatened with a lawsuit is fraud.
• The transferor left the jurisdiction secretly: This is considered evasion of creditors.
• The transferor concealed assets: You must clearly report all assets and their value.
• The transferor was insolvent: Disposing of assets while insolvent may be illegal under your state's laws.
• Asset transfers through intermediaries: Using a lien holder to transfer assets back to an insider is fraud.

The key point is that any assets must be properly accounted for and if transferred, the proper creditors must be paid, with the senior secured creditor having priority. Transfers to insiders are problematic, though through negotiation we have successfully worked around this.

What About the Trust Fund Recovery Penalty?

If the corporation owes trust fund taxes like employment taxes, any individual within the corporation who is willful and responsible for the non-payment can be assessed the Trust Fund Recovery Penalty for an amount equal to the actual amounts withheld from employees. This will almost always include the owners and officers.

The rule of thumb is that the Trust Fund will be about 55% of the debt, so by employing this strategy you may be able to eliminate the other 45% of the corporate IRS tax debt. Furthermore, if you don't have sufficient personal assets or income to pay the Trust Fund portion, you qualify for the IRS Offer in Compromise Program, where you can settle this portion for considerably less.

How Can I Start Another Company Doing the Same Thing?

If you worked in a specific trade before starting your corporation, the IRS cannot tell you that you can't work in that trade anymore. This means you are allowed to come forward as a potential purchaser of the corporate assets and can buy them from your old corporation, provided you meet all the requirements discussed above. You could start a new business, buy the old corporate assets, and start fresh.