My question involves business law in the state of: Any state
This is just a question of curiosity. I am not involved in any such predicament now.
It's very common in the media distribution business (CD's, DVD's, books) that small distributors will essentially run an unprofitable business BUT the owner continues to pay himself a nice salary. At some point vendors get upset because the distributor has fallen behind on payments and may threaten to sue, then the distributor threatens to declare bankruptcy but offers a settlement for pennies on the dollar owed. My question is whether it is legal for a CEO to pay himself a healthy salary while the business is unprofitable? Are there limits as to how much a distributor can pay himself before it becomes fraud rather than calling it a case of "bad business decisions"? So many small distributors go through this process of making money running an unprofitable business, declaring bankruptcy, then repeating the same process all over again, all at the expense of vendors.
This is just a question of curiosity. I am not involved in any such predicament now.
It's very common in the media distribution business (CD's, DVD's, books) that small distributors will essentially run an unprofitable business BUT the owner continues to pay himself a nice salary. At some point vendors get upset because the distributor has fallen behind on payments and may threaten to sue, then the distributor threatens to declare bankruptcy but offers a settlement for pennies on the dollar owed. My question is whether it is legal for a CEO to pay himself a healthy salary while the business is unprofitable? Are there limits as to how much a distributor can pay himself before it becomes fraud rather than calling it a case of "bad business decisions"? So many small distributors go through this process of making money running an unprofitable business, declaring bankruptcy, then repeating the same process all over again, all at the expense of vendors.
Business Issues: Media Distributors Who Short Change Vendors
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