Despite having a negative stigma, bankruptcy is often a great way to get a fresh financial start. In fact, one of the main purposes of bankruptcy is to help those who need it most by wiping the slate clean (or close to it). Filing for bankruptcy could be a great way to handle the extensive debt you may have. However, if you are involved in or own a business, there could be some casualties when you file a personal bankruptcy petition. It will probably depend on the structure of the business you are involved in. There may be consequences for business management, partners or shareholders, and assets.
Is Your NJ Business Vulnerable to Creditor Claims?
There are a handful of different ways to organize a business, and this will play a role when you file for personal bankruptcy. Four common types of businesses include sole proprietorship, partnership, limited liability company, and corporations:
- A sole proprietorship is a business that legally has no separate existence from its owner. This means income and losses are taxed on the individual’s personal income tax return. In regard to filing for bankruptcy, this means that your business assets are included in the bankruptcy filing. A bankruptcy trustee may administer and sell your assets.
- A business that is a partnership is considered an independent and separate business entity owned by two or more people. If you end up an insolvent partner, you may be required to sell your interests back to the partnership following your personal bankruptcy filing. Meanwhile, the partnership avoids becoming part of the bankruptcy proceedings.
- A limited liability company (LLC) is similar in that members of the LLC can demand the person filing for bankruptcy sell their interest back to the business. This will keep the LLC separate from the bankruptcy proceedings, and it helps the business avoid any disturbances to management decisions.
- Finally, corporations are a type of business that protect shareholders from liability, losses, and debts of the business. Since corporations are independent from their owners, your personal bankruptcy filing will not impact business management.
Following the bankruptcy filing, your shares can be administered or sold by the trustee in order to repay creditors. In summary, a corporation is not directly impacted by the bankruptcy of one of its shareholders.
Experienced Winslow Bankruptcy Lawyer Helps New Jersey Clients
If you are worried that your bankruptcy filing might impact your business, you should seek the help of an experienced New Jersey bankruptcy lawyer. Luckily for you, Joel R. Spivack, Esq. is one such attorney who knows what it takes to get you the help you need. He has worked for many years with bankruptcy clients in New Jersey, and he is well-versed in the pros and cons of both Chapter 7 and Chapter 13. He can also educate you on alternatives to bankruptcy which might better suit your needs. He represents clients in Camden, Cherry Hill, Winslow, Pennsauken, and across NJ. You should not hesitate to reach out to Mr. Spivack. Just call (856) 488-1200 or fill out the online contact form today to get started. The Law Office of Joel R. Spivack is conveniently located at 1820 Chapel Ave W #195, Cherry Hill, NJ 08002.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.