Bankruptcy is something you can file for as an individual or as a business, and there are differences between the two. Here are four facts about business bankruptcy.
- It May Not Apply To One-Owner LLCs
In some cases, personal bankruptcy may be the better option for you rather than business bankruptcy. This is often the case for corporations and LLCs with single owners. Because these businesses tend to be smaller and more intertwined with your personal assets, filing personal bankruptcy will allow you to discharge yourself of personal liability at the same time you liquidate your business’s assets. For example, if you’re the only owner of an LLC based in Colombia, MD, you may be able to file for personal bankruptcy rather than business bankruptcy Columbia MD.
- Business Bankruptcies for Partnerships Can Be Complicated
While partnerships and co-ownerships may apply to small businesses just like sole ownerships, there are enough differences that the same bankruptcy expectations may not apply. You should consult an experienced bankruptcy lawyer to determine whether a business bankruptcy is right for your partnership. There are inherent risks in partnership business bankruptcies, including being sued by your trustee or making it easier for your creditors to confiscate your personal assets.
- Be Prepared for Extra Costs
The types of fees for business bankruptcy and personal bankruptcy tend to be the same. The trustee is typically paid on commission and your creditors will receive their repayments from your liquidated assets. However, because businesses tend to have more assets and be worth more than individuals, you’re more likely to need the help of an attorney and the fees charged by attorneys may be higher. Business bankruptcy contains many moving parts and is thus quite a bit more complicated than personal bankruptcy, so you should be prepared to pay those extra costs for the assistance of an attorney. If you’re inexperienced in business bankruptcy and attempt to take care of everything yourself, mistakes may be made and you could end up on the hook for even more money than before.
- It Doesn’t Discharge Personal Liability
Keep in mind that, depending on the amount of assets and debts you have, filing for business bankruptcy may not cover all of your liabilities. Your business liability may be entirely discharged, but the balance of debts to assets may be great enough that your personal liability may be involved and creditors can expect you to repay the rest of your debts with your personal assets.
If you need to file for business bankruptcy, it’s important to do your research to determine which type of bankruptcy you should file for and find a qualified bankruptcy lawyer to assist you in filing.