What Bankruptcy Can You File If You Own a Business?

Related Ads

Business bankruptcy can be a bit more complex than personal bankruptcy, due to the fact that there are several different business structures. The appropriate type of bankruptcy can depend on how your particular business is organized and on how much of your personal assets are at stake. 

Business Bankruptcy Options

Most businesses are organized in one of several common ways:

  • A sole proprietorship- You and your business are one and the same. You probably file only one tax return, with your business income listed on your personal return. In most cases, debts that you sign for will be guaranteed personally
  • A partnership- For a basic partnership, the business income is essentially the personal income for each partner and each partner may be responsible for business liabilities
  • An LLC or limited liability company- This means you've set up a business structure that separates the business from the assets. Your personal income and business income are kept separate and you aren't usually personally responsible for the debts of a business
  • An s-corporation or a c-corporation-With this business structure, there is the maximum amount of division between you and your business. In other words, the business is an entirely separate legal entity that files its very own tax returns and stands on its own as its own "person" in the eyes of the law

Depending on which type of business structure you have, different options may be best for your business bankruptcy:

  • Sole proprietors normally file either a chapter 7 or chapter 13. The business bankruptcy is essentially a personal bankruptcy. Chapter 7 allows for the liquidation of business and personal debts, but assets must be sold. Chapter 13 allows retention of assets but requires a 3-5 year plan wherein some of the debts are repaid
  • Corporations or separate business entities can either file a chapter 7 liquidation bankruptcy, or can also consider a chapter 11 wherein they get to keep more of their assets and where the business is restructured to keep functioning. As long as the business can be profitable, a chapter 11 is designed to allow it to continue to operate while a plan is created to manage money and repay debts

Getting Legal Help

Ultimately, you should not try to decide on what type of bankruptcy to file on your own. An experienced lawyer can help you to determine the best course of action for your business bankruptcy and can assist you throughout the filing process to ensure things go as smoothly as possible. 

NOLODRUPAL-web1:DRU1.6.12.2.20161011.41205