Bankruptcy and Your Business

When a business is struggling financially, bankruptcy may be a viable option. Of course, bankruptcy is a last resort, but it can sometimes be the only answer to financial troubles. When considering filing for bankruptcy at your business, it is important to understand the different laws concerning the different types of business entities.

Partnerships, corporations, and limited liability corporations are all legal entities separate from their owners or shareholders. This means that the company itself can file for some form of bankruptcy, either Chapter 7 or Chapter 11, at no personal cost to the shareholders.

Sole proprietorships, on the other hand, are not eligible for the same benefits. These companies can not file bankruptcy on their own, because their owner or proprietor is personally responsible for the debts of the company. The individual must file for bankruptcy, and the company’s assets will be included in his personal filing.

Businesses filing for Chapter 7 bankruptcy essentially get to liquidate assets and get a discharge of debts (although corporations are not eligible for the same fresh start that individuals would be). Those filing for Chapter 11 may be in a position to keep running their business and restructure debts or negotiate with creditors.

Contact Us

If you have questions on setting up your business or resolving business disputes, the Minneapolis business law attorneys at Skjold ▪ Barthel, P.A. are here to help. Contact us by calling 612-746-2560 today for a free consultation.