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Can you clarify what my friend is achieving by selling his business for $1 to a relative?

it's an llc medical spa that he has owned for 2 years. he has all the latest most expensive lasers and liposuction equipment, which he is heavily in debt over. his credit is not good with his debtors and some of his product lines have been cut. so, he is transferring title to his step-daughter supposedly for $1 and has hired another doctor to work there. what is he doing and is it legal? this guy always seems to be scamming. does the debt follow the business? can his step-daughter automatically re-open the credit lines that have been closed?

Public Comments

1. he gains a dollar. thats it though
2. he's saving his ASSets
3. he probably gains nothing. Lenders and equipment sellers aren't inexperienced in their trade and almost certainly required his personal guarantee on the debts. and NO, the bank won't re-open the lines of credit -- even they have seen this dodge before and know perfectly well that a straw buyer has no resources to put into the business to make the payments. i think he's headed for bankruptcy.
4. In the same order: - The transaction of $1 is only a book entry and is absolutely valid. - This can, and will ensure transfer of ownership by way of a $1 transaction. - It is completely legal as the transaction is non-profit making, without any capital gains, within the family, and a book entry. - Opening of credit lines is based on the credit-worthiness of the individual, nature of business, collateral's, etc. - With a new owner, it is a new day
5. It appears he was about to lose his business in lawsuits, possibly through bankruptcy, so in order to salvage it, he has sold it to a family member. The equipment will go back to creditors, unless the new owner wants to take over the debt, but the business will remain untouched and creditors will not be able to recover all that is owed them through a lien on the business.