Will My Business Be Impacted By My Personal Bankruptcy?
If you are considering the possibility of filing for bankruptcy and you are also a business owner, it is important to speak with a St. Petersburg bankruptcy lawyer who can tell you more about the differences between consumer and business bankruptcy more broadly, and who can evaluate the particular facts of your case in order to help you understand whether or not your business is likely to be impacted by your decision to file for personal bankruptcy. Generally speaking, most business owners will not see their businesses affected when they decide to file for personal bankruptcy. However, there are exceptions, and it is important to understand how U.S. bankruptcy law will apply to your situation. Consider the following information from our St. Petersburg bankruptcy attorneys, and then get in touch so that we can assess your case specifically.
Most Businesses Are Separate Entities from the Business Owners
In general, most businesses are structured so that the business is a separate entity from the business owner (or owners) individually. Even with types of business structures with pass-through taxation, the businesses are still distinct entities. Accordingly, the business owners will not typically be personally liable for the financial downturn of the business, and an individual business owner’s financial issues will not directly impact the business. Types of businesses that will not be impacted by a business owner’s decision to file for personal bankruptcy include partnerships (including limited partnerships or LPs), limited liability companies (LLCs), and corporations (including C-corps and S-corps).
Sole Proprietorships Work Differently
If you are the single owner of a business and the business is structured as a sole proprietorship, it is essential for you to know that you are not an entity separate from your business for most financial purposes. In other words, if you file for personal bankruptcy, you will also be filing for business bankruptcy. Likewise, if your business is struggling and you are considering a business bankruptcy, then your business bankruptcy will also need to be a personal bankruptcy. All assets and debts for a sole proprietor will include those of the individual and of the business.
When a sole proprietor plans to file for Chapter 7 bankruptcy for themselves, this means the business will also be filing for Chapter 7 bankruptcy and will need to close its doors. Since Chapter 7 bankruptcy is a liquidation bankruptcy, all non-exempt assets of the debtor (including the assets of the sole proprietorship) will need to be liquidated so that creditors can be repaid. At the same time, however, if a sole proprietor plans to file for a reorganization bankruptcy, they can file for Chapter 13 bankruptcy — a type of reorganization bankruptcy limited to individuals — and can also reorganize business debts.
Contact a St. Petersburg Bankruptcy Attorney
Bankruptcy for individuals is extremely complicated, and it is critical to work with an experienced St. Petersburg bankruptcy attorney on your case. One of the lawyers at the Law Offices of Stephen Barszcz can evaluate your circumstances for you today and can provide you with more information about your options for bankruptcy.