Although owning a small business has many advantages, it also has many disadvantages. Simply put, employees of large corporations or government agencies have far more job security than small business owners. Small business owners may find themselves foregoing personal finances to meet the needs of the company, investing an increasing portion of their resources there instead, or receiving such meager salaries that they must incur debt to meet their basic needs.

If this scenario seems familiar, you may find yourself in need of bankruptcy relief. You may be concerned about what impact personal bankruptcy will have on the business you’ve worked so hard to build. Read on to learn more or contact business at 800.400.9000 for help.

Entrepreneurship

If your business is a sole proprietorship, the law considers both your personal and corporate business assets and liabilities to be the same entity. This means that your personal bankruptcy will also include any debts incurred from the operation of your business along with any assets.

If you file for Chapter 7 bankruptcy, your company’s assets will be listed as your own personal property and protected accordingly. Business assets that exceed the amounts that can be protected using your state’s exemptions may be liquidated by the Chapter 7 Trustee, so it is best to discuss your finances with a qualified attorney to see if a Chapter 13 repayment plan may be a better option. Many sole proprietors are able to continue operating their business, despite the personal bankruptcy filing, but it will depend on the specifics of each individual case.

A Partnership

If you jointly own a firm with one or more co-owners in a general partnership, you are in a situation comparable to owning a sole proprietorship since you are personally liable for the debts of the business and those debts will be included in your personal bankruptcy. Like a sole proprietorship, your portion of the business will need to be protected and any assets that exceed exemption may be liquidated by the bankruptcy court. In the instance where your portion of the business assets are not fully protected, your partner may have the opportunity to ‘buy’ your share of what’s exposed from the Chapter 7 Trustee. If the business debts are in both your name and your partner’s name, both individuals may need to consider personal bankruptcy to absolve themselves of the debt.

Corporation

If you have incorporated your company as a corporation or a limited liability partnership, it is treated as a separate entity. Any debts owed by the incorporated company is separate from your personal debt and would not be included in your bankruptcy unless you have a personal guarantee. However, while the company may be a separate entity, your interest in that company must still be listed and protected as an asset and that asset may or may not be full protected, depending on the circumstances. A reputable bankruptcy law firm will be able to determine if a personal Chapter 7 bankruptcy is feasible or if a Chapter 13 filing may be more appropriate.

Winterbotham Parham Teeple, a PC Can Help You.

If you want to learn more about your options as a small business owner facing bankruptcy, please contact Winterbotham Parham Teeple, a PC right away. For a consultation, please contact us at 800.400.9000.