So you are a business owner and are in need to file for bankruptcy. What will be your company’s plight in such a case?
Firstly, you must understand that in most of the cases your company is a distinctly separate entity under the law, whether it is a corporation or an LLC. Imagine your company as its own legal representative, completely separate from yourself. Your company does not necessarily need to follow suit, simply because you have filed for bankruptcy. In fact, there might not be a need to have your company filed in case it is a small and closely held entity, as the trustee might not get anything from it to distribute to the creditors.
However, there are some situations in which you might be required to have your company file for bankruptcy. Having your company file for bankruptcy might prove to be helpful in cases where the creditors are chasing the assets and the payroll taxes are owed by the company. In case of small companies, the owners are usually responsible for certain non-dischargeable (in bankruptcy) payroll taxes. Thus, it is sometimes better to file for bankruptcy to stop the creditors from getting a hold of your assets. After filing for bankruptcy, your tax claims will be given a priority over any other creditors.
One more reason for this bankruptcy being a good idea is that it allows a quick shut down of the company and stops the creditors from making efforts to collect from you. Even though their efforts might not be targeted at you as the owner of the company, you will be likely facing troubles because of their attempts to get back their money. So, it will be easier to deal with only the trustee because of filing rather than dealing with a host of creditors.
Your ownership of the company is important even if your company does not file for bankruptcy. It is an asset which will be accounted for while filing for a personal bankruptcy. A basic balance sheet of liabilities and assets is compiled to determine the value. Your interest in the company will also be utilized for your income calculation. The profit and loss statements of the company will prove to be very useful here. Thus, it will be necessary for you to be aware about the financial health of your company even if you are filing for bankruptcy individually.
You can visit Recovery Law Group or call on 888-297-6203 to get best advice about your financial options from the best bankruptcy attorneys of Los Angeles & Dallas, TX.