If your business is struggling financially, you may be worried about whether or not you will be held personally liable for the debts of your business. The answer isn’t exactly clear — it largely depends on how you formed your business. Here’s what you need to know about owing business debt and how bankruptcy may be an option to help relieve you of that debt.
Are You A Sole Proprietor Or In A Partnership?
If you are a sole proprietor and owe business debt, you are most likely going to be held personally responsible for the debts of your business if you file for business bankruptcy. The same applies if you are part of a partnership: you and your partner will be equally responsible for the debt your business accrued while it was in operation.
Did You Form An LLC Or A Corporation?
If you formed an LLC or a corporation when you started your business, you cannot be held personally liable for the debt your business has accrued while in operation. Forming a corporation or an LLC legally separated you from your business; your business is considered its own legal entity. Therefore when you file for a business bankruptcy, the assets of your business may be liquidated to pay off your debts, but you cannot be personally pursued for any debt that remains after all of your business assets have been liquidated. The one exception is if you personally guaranteed business debts, in which case, you would be held liable for only those debts.
What To Do If You Are Personally Liable For Business Debts
If you are considered to be personally liable for debts that your business accrued during its operation, a Chapter 7 bankruptcy may provide you with a solution to have some or all of those debts discharged. A Chapter 7 bankruptcy involves the liquidation of your assets (business and/or personal) and any unsecured debts that are left over are generally discharged. Some secured debts and tax debt is generally not discharged, even in a Chapter 7 bankruptcy.
Contact Joel M. Aresty, P.A. Today
If your business has accrued significant debt and your profits aren’t enough to cover it, bankruptcy may be an option for you. Contact an experienced business bankruptcy lawyer to learn more about whether you can be held personally liable for the debts of your business. Call now at (305) 904-1903.