Bankruptcy law provides powerful tools for borrowers struggling with unmanageable debt, but owning a business makes the situation more complex. Depending on the legal form of the company and the bankruptcy program you choose, the trustee can potentially require you to close or seize your assets. Before filing for debt relief, you should understand how personal bankruptcy can affect your business.

The Impact of Personal Bankruptcy on a Small Business

Bankruptcy for Sole Proprietorships

If you operate as a sole proprietorship, there is no legal distinction between you and the business. Unfortunately, this means that any of your business assets are subject to seizure unless you can claim an exemption. Filing Chapter 13 bankruptcy may help you keep your business if you can show that you have enough revenue to continue paying creditors, along with your monthly bankruptcy payments.

Bankruptcy & LLCs

A limited liability company (LLC) provides some separation between yourself and the company, which could help save it in a bankruptcy. If your LLC has multiple members, the trustee may seize your right to income from the business, but cannot make management decisions or dissolve the company. Unfortunately, if your single-member company is an LLC, after seizing your share, the trustee may vote to liquidate the business.

Bankruptcy & Corporations

Corporations are separate legal entities, so your financial situation may not affect the business at all. While bankruptcy law gives the trustee the right to seize your stake, they cannot affect operations unless you’re the majority shareholder. If this is the case, the trustee may dissolve the company if the business has minimal debts and valuable assets to sell.

For nearly 30 years, the bankruptcy law attorneys at Riley, Resar & Associates, P.L.L., have been helping struggling business owners throughout Lorain, OH, reclaim their lives from debt. No matter what your financial situation is, you can rely on their team to provide the respectful service and effective legal service you need. Visit their website for more on their bankruptcy law services, or call (440) 244-5214 for a consultation today.