Starting and running a small business can be challenging. From finances to inventory and everything in between, there are plenty of major tasks that need to be managed. Unfortunately, every year many small businesses fail due to struggling finances. If your business is currently running in the red, it’s easy to become overwhelmed trying to find solutions to keep your doors open. Bankruptcy is one option to consider. Here, we’re going to take a look at what you should consider before filing for bankruptcy for your small business and what type of bankruptcy you should file if you decide to explore that route.
Should I Keep My Business Open During Bankruptcy?
Filing for bankruptcy is a solution many small businesses use to survive. If you’re considering bankruptcy, however, there are a few questions you need to ask yourself regarding the state of your business. Here are a few factors to help determine your small business sustainability:
- Is your business making money?
- Do you have more assets than debts?
- Are you personally responsible for business debts?
If your business is making money, has more assets than debts, and you’re not personally responsible for your business debts, keeping the business open by filing for bankruptcy is a viable option. However, if your business is not making money and has more debts than assets, it might be time to close the doors and liquidate the property owned by the business to pay-off your current debts.
What Type of Bankruptcy Should I File?
When filing for bankruptcy, there are two types to consider —Chapter 7 and Chapter 13. The type of business you own determines the type of bankruptcy you’ll need to file.
Filing for Chapter 7 & 13 Bankruptcy as a Sole Proprietor
A sole proprietorship is a small business that’s owned under an individuals’ name. Many sole proprietors claim their business income and expenses on their personal tax returns. Some examples of sole proprietors include freelancers, artisans, and individuals with multiple streams of income. Sole proprietors can file for Chapter 7 bankruptcy which eliminates both personal and business debts. By filing for Chapter 7, the individual owner of a sole proprietorship can start fresh in both areas of their life and have a chance at a successful future.
Sole proprietors can also file for Chapter 13 bankruptcy. The difference between a sole proprietor filing for Chapter 7 or Chapter 13 bankruptcy is that Chapter 13 does not eliminate any personal debts. Therefore, Chapter 13 bankruptcy is the best choice for individuals who have kept all debts – personal and business — separate.
Filing for Chapter 11 Bankruptcy as an LLC or Incorporated Business
All businesses that are incorporated or LLC need to file for Chapter 11 bankruptcy, where no personal debts of the owner or partners are considered. The unique difference of Chapter 11 bankruptcy is that when a business files, they’re able to remain in operation and keep their assets while they work through a repayment plan with creditors.
Experienced Small Business Bankruptcy Attorneys in Louisiana
If you’re ready to file for bankruptcy to keep your small business afloat, contact the trusted attorneys at E. Orum Young Law today. With more than 35 years of experience serving clients in Louisiana, we’re ready to help you navigate your case and can help you determine which type of bankruptcy is right for you. With more than 20,000 cases filed, we have filed more bankruptcy cases than any other attorney in Northeast Louisiana. Let us help you file yours today. Call our office at 3180450-3192 or contact us online to schedule a free case review. You have the right to know your options.