Business Mistakes Can be Forgiven with Reorganization or Liquidation
One of the great things about the Sacramento area is that there are rich opportunities for small businesses to thrive and flourish from Carmichael to El Dorado Hills. There are restaurants owned locally on every street. There are offices for every type of professional service, from dentists to certified public accountants. While these small businesses are a valuable part of our community, that doesn’t necessarily mean it is easy to be a small business owner.
Any number of issues can arise for a small business, including all kinds of tax liability, tort liability for a personal injury, liability for disabled access issues, and more. Not to mention business can simply be down or fluctuate greatly over periods of time. In these situations it may be a good idea to explore the possibility of filing for bankruptcy protection.
Bankruptcy can be the solution that allows a small business owner to reorganize debts to save the business, liquidate the company, or wipe out personal liability for business debts. Depending on the owner’s particular goals, it might be a good idea to file a business bankruptcy, a personal bankruptcy, or both.
A Chapter 11 bankruptcy is the one most people have heard of on the news. It is typically known as a business reorganization bankruptcy. This type of bankruptcy is typically used by businesses who want to continue operating while in the bankruptcy. This type of bankruptcy can be more expensive and complicated when compared to other types of bankruptcy. But, if the business has less than a certain amount of debt, it can be classified as a small business, which usually can proceed more quickly because there are fewer procedural hurdles over which to jump.
A business Chapter 13 doesn’t really exist in the same way as a Chapter 11 or Chapter 7. However, in a sole proprietorship, the debtor and her business are considered the same entity. In that case, business debts are considered part of the bankruptcy. A Chapter 13 then is designed to allow the debtor to keep all personal property and reorganize debts through a three to five year repayment plan. This could be a great option for sole proprietors who have substantial assets and want to continue operating.
A business Chapter 7 is good for a partnership, corporation, or LLC that is looking to close down, or liquidate, a business. In these cases, the business does not receive a discharge. When a business Chapter 7 is filed, the bankruptcy trustee sells the assets of the business and uses the proceeds to pay creditors. This can be a very attractive option for small business owners who desire to close the business without the hassle of negotiating the disbursement of assets to creditors.
A personal Chapter 7 for a sole proprietor can help close the business and get rid of debts. Or, in the alternative and in the right circumstances, the bankruptcy can get rid of debt and allow the debtor to continue the business free of debt.
Most business owners are not wildly successful on their first try. Often, it takes some rough experiences to figure out the way to succeed. Bankruptcy can offer a way to acknowledge that this particular business isn’t working the way it was supposed to and allows the debtor to make a professional pivot to succeed on the next attempt. Bankruptcy in El Dorado Hills or nearby areas is available for those who need help with their business debts.