Statistics tell us that half of small businesses fail within the first five years. If you are facing this unfortunate reality, you have a number of options. You might try to find a buyer willing to operate the company as a going concern. You could sell the real estate and personal property separately. If this fails you may have to consider a business bankruptcy TN owners have chosen in the past. Here you have the option of filing either Chapter 7 or 13.
Individuals and businesses can file Chapter 7. Sole proprietors can only file as individuals because the Internal Revenue Service doesn't recognize a difference between an individual and a sole proprietor. Filing both ways is an option. If you file only as a company, any personal responsibility you have for company debts will remain your responsibility.
Chapter 7 benefits sole proprietors because they can rid themselves of personal and company debt with one filing. Exempting assets is possible. When you want to continue to operate your business, you can do so without the previous debt. Bankruptcies are an easy way out of a failing company for corporations. After a Chapter 7 filing, a trustee is put in charge of liquidating assets and paying creditors.
Corporations aren't allowed exemptions or continuation of a business in Chapter 7, and that can be a disadvantage for them. It won't help anyone who wants to eliminate personal debt. It can be helpful for partners who are no longer interested in the company and don't have personal responsibility for company debts. A company without many physical assets might be a good candidate for Chapter 7.
LLCs, partnerships, and corporations don't have the choice of filing Chapter 13 at all. It is reserved for sole proprietorships and individuals. It is possible for a sole proprietor to file personally and eliminate company and personal debts at one time.
If you want to keep your company operating, Chapter 13 may be the answer for you. With this filing, you get to keep your assets and repay your debts through a structured plan. With Chapter 7, sole proprietors who have a lot of company assets and not enough exemptions face having a trustee sell off part of their assets. This won't happen with a Chapter 13 filing. Even if you are running a company as a corporation, you can file Chapter 13 to eliminate your personal responsibility for company debts.
The biggest drawback for businesses is that Chapter 13 is reserved for individuals. Chapter 13 isn't a quick process for those with repayment plans. Those can take up to five years to complete. If you have assets you can't exempt, you are required to pay unsecured creditors an amount equivalent to their face value. Even though you eliminate personal debt with Chapter 13, the company debt will still exist.
Bankruptcies aren't great options no matter which way you file. They should be considered last resorts. Before you take such a big step you need to try all the other options you have. Once you've exhausted those, going to court to dissolve your company may be the only thing left to do.
Individuals and businesses can file Chapter 7. Sole proprietors can only file as individuals because the Internal Revenue Service doesn't recognize a difference between an individual and a sole proprietor. Filing both ways is an option. If you file only as a company, any personal responsibility you have for company debts will remain your responsibility.
Chapter 7 benefits sole proprietors because they can rid themselves of personal and company debt with one filing. Exempting assets is possible. When you want to continue to operate your business, you can do so without the previous debt. Bankruptcies are an easy way out of a failing company for corporations. After a Chapter 7 filing, a trustee is put in charge of liquidating assets and paying creditors.
Corporations aren't allowed exemptions or continuation of a business in Chapter 7, and that can be a disadvantage for them. It won't help anyone who wants to eliminate personal debt. It can be helpful for partners who are no longer interested in the company and don't have personal responsibility for company debts. A company without many physical assets might be a good candidate for Chapter 7.
LLCs, partnerships, and corporations don't have the choice of filing Chapter 13 at all. It is reserved for sole proprietorships and individuals. It is possible for a sole proprietor to file personally and eliminate company and personal debts at one time.
If you want to keep your company operating, Chapter 13 may be the answer for you. With this filing, you get to keep your assets and repay your debts through a structured plan. With Chapter 7, sole proprietors who have a lot of company assets and not enough exemptions face having a trustee sell off part of their assets. This won't happen with a Chapter 13 filing. Even if you are running a company as a corporation, you can file Chapter 13 to eliminate your personal responsibility for company debts.
The biggest drawback for businesses is that Chapter 13 is reserved for individuals. Chapter 13 isn't a quick process for those with repayment plans. Those can take up to five years to complete. If you have assets you can't exempt, you are required to pay unsecured creditors an amount equivalent to their face value. Even though you eliminate personal debt with Chapter 13, the company debt will still exist.
Bankruptcies aren't great options no matter which way you file. They should be considered last resorts. Before you take such a big step you need to try all the other options you have. Once you've exhausted those, going to court to dissolve your company may be the only thing left to do.
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