Small business owners are some of the bravest adventurers when it comes to finances. Not only does starting a small business often require a large investment in the form of a loan or personal funds, but the liabilities of starting and maintaining a small business are numerous. Sadly, many entrepreneurs are unable to keep expenses balanced with revenue, especially during the first few years of a startup. Although bankruptcy is a common occurrence for small businesses, the outcome of bankruptcy will change depending on the type of business and the ownership status. At Behm Law Group, Ltd., our attorneys work to protect small business owners throughout the process of filing for Chapter 7 Bankruptcy in Waseca, MN.
For most small businesses, there are three main forms of ownership. Each type of ownership is affected differently when the business enters the process of Chapter 7 bankruptcy:
- Sole: If you own your business, you are the sole proprietor. As a sole proprietor, your finances are linked with your business finances. If your business (or you) are over your head in debt, you can only petition for a personal case of Chapter 7 bankruptcy. It’s not possible for your business to file for bankruptcy alone because there is no separate, distinct business entity apart of you, so the process must combine your personal and business debt into one case. You can, however, prevent many of your assets from being liquidated with your bankruptcy exemptions.
- Partner: If your business is a partnership, it still is not a separate entity from you and your partner’s personal finances. When filing for a Chapter 7 partnership business case, the process is not really any different from a personal case. In partnership business bankruptcy, the partnership debts are collectible against you and all partners personally and your personal assets must also be listed in the bankruptcy petition. However, you can still protect your personal assets with your bankruptcy exemptions.
- Corporations and LLCs: A business owned as a corporation or an LLC is a separate and distinct legal entity from you and, therefore, it must file for a separate business bankruptcy. In such a bankruptcy, however, there are no exemptions that can benefit the corporation or LLC. The trustee handles liquidation for corporations and LLCs. If your business is an LLC, you are required to eliminate any of your own debts with a personal bankruptcy case before filing a business case.
Filing for bankruptcy can give you the financial relief you need when there are no other options. For more information about filing as a small business for Chapter 7 bankruptcy in Waseca, MN, contact Behm Law Group, Ltd. at (507) 387-7200.