Filing bankruptcy for a business can mean various things depending upon the legal form under which you operate, the assets and liabilities and whether you personally guaranteed them, and the future direction, if any, that your company will be taking. If you want to keep your business and continue its daily operations (because you need the income to provide support for your family), your main concern will be holding on to all of its assets and keeping the revenue stream that it generates on a day to day basis. If you are closing the doors of your company, then you will primarily be concerned with your ongoing personal liability for its debts.
I Need to File Bankruptcy For My Business and Want to Keep It
Generally, you can file bankruptcy if you have a business, and keep your business when you file, as long as the net assets and goodwill of your company do not exceed your allowable exemptions. Even if your company has substantial equipment or other assets, if the assets are encumbered by liens, the net value of the assets may low enough such that they are protected by your exemptions. Also, if you are married and filing bankruptcy, some or all of the assets of the company may be the separate property of your non-filing spouse and therefore not included in your filing.
I Need to File Bankruptcy For a Company that is Out of Business
If your company is out of business, or in the process of closing its doors and ceasing operations, then your concern is not keeping the company. Rather, your main concern will be to mitigate your personal liability for the debts incurred in the ordinary course of business of the company. For example, you may be a guarantor on a business lease or specialized equipment, or you may have personally guaranteed the company credit cards. In such a case, you have look to the nature and type of the business, specifically, the legal form under which the company has been structured.
Sole Proprietorship
If the company has been structured to operate as a sole proprietorship, then the business name is simple a fictitious name used by you. The business is not formed as a separate legal entity distinct from you, its owner. Rather, the company is really just you, operating and holding yourself out to the public under the fictitious name that you have chosen. In such a case, your only option is to file a personal bankruptcy. Only a personal filing will eliminate the debts of a sole proprietorship.
Corporation or LLC
If the company operated as a corporation or an LLC, then the company is a separate legal entity, separate and distinct from you. It has its own assets and its own debts. Its debts are not yours unless you personally guaranteed them. If you did not personally guaranty the debts, then you can file for the corporation and you will have no liability personally. If you did sign a personal guaranty for any of the company obligations, then you will need to file a personal bankruptcy to eliminate your personal liability for those obligations/debts.
Filing for Both
In some cases, it may make the most sense to file for both the business and also file a personal bankruptcy. Depending on your particular situation, this may be the cleanest and safest way to ensure that you are not tied down to company obligations and truly get a fresh start. An experienced bankruptcy attorney can properly advise you regarding whether your best course of action is to file only for your business, file only for yourself personally, or both.
