How Large Affluent Companies Avoid Bankruptcy

Many of the top companies in the world are backed by teams of experienced lawyers tasked with the job of finding clever ways of circumventing the law to allow these billion-dollar corporations to avoid lawsuits.

Decreasing taxes, sidestepping finance laws, and avoiding lawsuits from customers are a few examples of situations where large corporations utilize legal loopholes in order to remain successful.

Let’s discuss five legal loopholes large corporations use to avoid lawsuits:

1.    Tax Havens and Transfer Pricing

2.    Punitive Damages Deduction

3.    Carried Interest

4.    Patent Injunctions

5.    Bankruptcy

Tax Havens and Transfer Pricing

International corporations are not required to pay taxes on any profits incurred overseas unless they transfer the profits to a US bank. Transfer pricing is a practice adopted by international corporations that allow companies to transfer international profits to offshore banks so that they’re considered overseas earnings. The profits are kept in an offshore account where taxes are indefinitely deferred.

Punitive Damages Deduction

When large corporations are found to be criminally liable for an offense and are charged with punitive damages, according to the law, these expenses are considered normal business expenses. Companies are therefore able to claim the cost of this lawsuit as a business expense and significantly reduce the cost to the company.

Carried Interest

The managers and CEOs of the world’s leading companies are able to pay significantly lower taxes on their income than the average person. The profits earned from investing in a company are known as carried interest and are taxed at the capital gains rate which is a much lower rate than income. Instead of claiming to receive a salary for working at a company, CEOs and managers refer to their earnings as carried interest in order to avoid paying higher taxes.

Patent Injunctions

Patent injunctions are used when a company believes that another organization’s product is infringing on its copyrights. If a judge grants the injunction, the opposing company is prevented from selling the infringing product. Corporations have used this threat as a scare tactic to influence small companies to discontinue selling their product or pay them an exorbitant fee. This method has ensured that larger corporations have been able to dominate their industry by monopolizing sales of particular products.

Bankruptcy

Large corporations sometimes use bankruptcy to avoid lawsuits. This is a controversial legal strategy that is still used today. Large corporations establish shell companies that take on legal liability while keeping their valuable business assets separate from this new company. The shell company then files for bankruptcy which in turn freezes any lawsuits associated with the company. The goal of this tactic is to permanently block or delay any lawsuits against the parent company.

Final Thoughts

Several different clever legal strategies have been utilized by companies throughout the years to avoid any legal ramifications for their actions. Bankruptcy, tax havens and transfer pricing, patent injunctions, carried interest, and punitive damages deductions are a few of the legal loopholes utilized by multinational corporations.

If you are already filling the pinch of the recession and you need to file bankruptcy please schedule an appointment with us here at Hishaw Law LLC. We are experienced in handling Chapter 7 and Chapter 13 matters. Please complete the online bankruptcy form. To schedule a consultation with Hishaw Law LLC please contact us at 1.307.228.0407

Credit Matters to Consider Prior to Filing Bankruptcy

Having to declare personal bankruptcy is one of the most difficult decisions any adult will have to face, as regards their finances. It can be immensely taxing to your emotional health and sense of self-worth—but this doesn’t have to be so. Many financial advisers agree that filing for bankruptcy can be the wisest course of action, relieving the stress of crushing debt and eliminating those constant collection calls. 

But, what do you do after, when you have to rebuild your credit, from the beginning, with the red letter of bankruptcy making alarm bells go off whenever a lender looks your way? Is there any real way to repair your credit? Turns out, there are several things you can do to optimize your chances of rebuilding your credit the right way, and there are lots of Best Credit Repair Guides online to help even more. 

1. Make sure your bankruptcy is reflected accurately in your credit report. This may seem counterintuitive—but think about it. Would you rather have a bankruptcy turn up or a whole mess of outstanding balances? If your report is accurate, after bankruptcy all those discharged debts should be wiped out to nice, round $0s. However, some creditors will keep up reporting negative account information. If this happens, make sure to send each reporting agency a copy of your debt discharge, so they can remedy the error. In any case, be prepared for your credit score to depreciate considerably, sometimes by as much as 240 points, likely putting you around 530-540. 

2. Budget, budget, budget. While we aren’t saying, by any means, that your bankruptcy was due to a lack of budgeting, since you’re newly dedicated to your financial health, it’s important to assess your income. Divide your expenses into three types: fixed, variable, and irregular. Fixed expenses are the ones whose amount never changes and that you absolutely must pay every month—say, your rent or your car payment. Variable expenses might be paid monthly as well, but their cost can fluctuate—like your utilities and food bills. Finally, irregular expenses are those that aren’t monthly but can come up periodically, like health insurance or Christmas gifts. 

Once you’ve figured out where you spend your money, and allocated an amount to each element, make sure to keep paying your non-bankruptcy-related accounts. Student loans, for instance, usually can’t be discharged and must still be honored. 

1. Develop new credit. Building your credit up again is going to be an uphill battle, no doubt about it. One of the easiest ways to start is by applying for retail and gas credit cards, since these usually have less stringent requirements than other unsecured cards. Other credit cards with higher qualification standards may also be an option, since the fact that you can’t declare bankruptcy again for seven years may help your odds of approval. Another option is a secured credit card or loan. These do require a security deposit (hence the “secured” bit) but many offer the option of switching you to an unsecured card after a year or so. A third option is getting a co-signer with good credit. If you do go this route, the pressure to keep up with your payments is even stronger, since defaulting affects not just you, but your co-signer.

Since you did declare bankruptcy and took a big hit to your credit, you should be aware that any card or loan you may be able to obtain will have higher interest and more restrictions than if you had a great credit score. 

Once you’ve carefully followed these three steps, you should be well on your way to healthy credit. Congratulations!