Small Business Bankruptcy
Filing a small business bankruptcy in North Carolina will relieve you of your personal obligations on business debt. Your business entity will still be liable for the debt. As a result, for most small businesses, a Chapter 7 or Chapter 13 combined with a dissolution of the corporate entity, will accomplish your goal of eliminating both personal liability and business liability. After bankruptcy, most small business bankruptcy clients are able to start a new small business under a different name.
Despite what you’ve read about filing business bankruptcy under Chapter 11, our clients often accomplish the same result through a personal bankruptcy by filing a Chapter 7 or Chapter 13 bankruptcy, and dissolving the small business. This saves you thousands of dollars and you are rewarded with the same result– you are free from your obligation under the small business debt.
Personal Liability In Small Business Bankruptcy
When most small business owners take on business debt, they sign as an officer or member of the small business, and then again personally. This guarantees the lender that either the business or the individual will repay the debt. This is why simply dissolving the business will not eliminate the debt from your life—you’re still on the hook personally. This means creditors for the business can come after your personal assets: home, vehicles, savings, etc.
Business Assets and Liabilities
When you file a personal bankruptcy and include business debt, you’ll also need to provide income and loss statements for the business for the year prior to filing. Your Charlotte bankruptcy attorney can assist you with putting these together, if an accountant has not already done so. You’ll also need to list all assets and debts of the business.
Dissolving The Company
Dissolving an LLC or other small business entity eliminates the potential for creditors to pursue the company for debt—the company no longer exists. If you file a personal bankruptcy in combination with the dissolution, you relieve your personal liability. In essence, you’ve filed a small business bankruptcy by filing personally. If there are assets of the company which need to be addressed, our firm can assist with contacting creditors in compliance with The North Carolina Business Corporation Act.
Starting Another Business
Filing a small business bankruptcy does not prevent you from starting a new business. You’ll be subject to the same approval process if you need to take on debt to get the business started, and your personal bankruptcy may be a hurdle from a credit perspective. But entrepreneurs are creative and often find funding outside of traditional means to get new businesses started.
Call today if you have questions about your small business, small business bankruptcy or personal bankruptcy. The consultation is free, and we’re here to help. We can be reached at 704.479.7747. Or, you can click HERE to request a free consultation.