When a small business owner in Ohio faces financial difficulties, options under the U.S. Bankruptcy Code may be considered. However, it is important to gain knowledge about the various small business bankruptcy options. Without the necessary information, a business owner may falter in making important decisions about the future of his or her business.
If a sole proprietor of a small business files for Chapter 7 bankruptcy in his or her personal capacity, the business is not in jeopardy. However, if bankruptcy is filed and the business is a corporation, partnership or limited liability company, the business will be closed because it would be considered a separate legal entity. In such a case, the bankruptcy trustee would determine which of the business's assets must be liquidated to pay creditors. However, since a sole proprietorship's assets belong to the owner, he or she can file for personal bankruptcy and then would be able to keep the business.
While business owners can file for Chapter 7 or Chapter 13 in their personal capacities, businesses can file for Chapter 11 bankruptcies. This allows a company to remain open and continue operations while the business debts are being repaid according to a court-approved plan. The business may continue operations as a debtor in possession or under the guidance of an appointed bankruptcy trustee.
Regardless of whether an Ohio business person considers personal or business bankruptcy, it is not something do to in haste. An experienced bankruptcy attorney would be the ideal person to turn to for education about the pros and cons of each small business bankruptcy option. Being equipped with the information that will allow informed choices may provide a small business owner with an opportunity to get a fresh start.
Source: smallbusiness.chron.com, "Can I Keep My Business If I File for Chapter 7 Bankruptcy?", August Jackson, Accessed on Feb. 3, 2016