Will a Personal Bankruptcy Affect my Business?
Most people who file for personal bankruptcy are concerned about their household keeping as much property as possible while regaining control of their financial situation. For people who own businesses, however, there are often additional concerns regarding the effect that filing for personal bankruptcy may have on their business.
The answer to this question is the same as the answer to almost any other legal question: “it depends.” Specifically, this determination largely depends upon what type of business entity you own. If you are a business owner, you should always consult with an experienced bankruptcy attorney regarding the possible effects of personal bankruptcy on your business. If you are considering bankruptcy do not hesitate to contact The Law Office of Ronald D. Weiss, P.C. at 631.271.3737 to schedule a consultation today.
Effects on certain types of businesses
The following are brief overviews on the effects on different types of businesses:
Corporations – A corporation is a separate entity than its owners and therefore the assets of the corporation will not be affected by bankruptcy. However, you should always be aware that your shares are seen as an asset of your bankruptcy estate and may be subject to liquidation.
Sole Proprietorships1 – This type of business is not a separate entity from the owner, so all business assets and debt are also considered personal. For this reason, if you file for personal bankruptcy, you must include all business-related debts as well, and the assets of the business will be subject to liquidation, which may end your operations.
Partnerships2 – Partnerships are similar to sole proprietorships in that all personal and business assets and debts are considered to be the same. It is additionally difficult for partnership assets to qualify for exemption in a personal bankruptcy, so it is likely they will be liquidated to help pay off debts.
If you own a sole proprietorship or partnership, you must carefully consider the effects of bankruptcy on your business. Many such business owners elect to file for Chapter 13 bankruptcy instead of Chapter 7 to avoid liquidation of their business. An experienced Long Island bankruptcy attorney can advise you of your options regarding personal bankruptcy and your business.