Should I file chapter 7 bankruptcy for my business?
This is a question that our clients often ask when they own a sole member LLC or are the only shareholder of their corporation and would like to close the business. The answer will usually depend on the answer to two questions. The first question concerns whether the business has any assets. Corporations and LLC’s do not get discharges like individuals, so if the business has no assets, there is no need to file a bankruptcy. The best option may be to simply dissolve the LLC or corporation and give notice to the creditors of the business.
The second question is whether the owner has any personal liability on the debts of the business. Many times, clients do not know, or are unsure of whether there is personal liability. Typically, new businesses are not able to obtain credit on their own and it is the personal credit of the owner that is used to obtain credit. In this case, the loan is typically guaranteed by the owner. In other words, if the business does not pay, the owner can be sued individually. We are always happy to assist our clients with determining the extent of their personal liability. If there is personal liability, often times it is better to proceed with a personal chapter 7 in order to protect the owner. We understand that every case is different and we are always willing to discuss bankruptcy and non-bankruptcy options for our business clients.