Starting a small business can be risky. You have a fifty-fifty chance of surviving over a five year period. If you are one of the unlucky ones who is facing a mountain of debt without much hope of recouping your losses, you have some decisions to make. You might be able to sell off the real estate and then sell the personal property piecemeal. You could also consider a business bankruptcy TN owners have used to their advantage in the past. Your next decision is choosing either Chapter 7 or 13.
You may file chapter 7 personally or as the owner. If you are a sole proprietor, you will have to file as an individual because the IRS doesn't make a distinction between you and your company. A lot of owners file both ways. The discharge of business bankruptcies doesn't wipe out personal responsibility for company debts.
The advantage of Chapter 7 for sole proprietors is the ability to eliminate debt with one filing. They are allowed to exempt assets and can continue to operate their businesses. The advantage for a corporation, that wants out of a failing business, is the opportunity to walk away and let the trustee handle the liquidation of assets and repayment of creditors.
There are disadvantages to Chapter 7 filing for corporations. Their debts won't be discharged as a result of this action, and the company will be shut down. A company filing doesn't allow for exemption of assets. It won't wipe out personal debt. It is a good option for those who want out of a company, who have few company assets and aren't personally liable for company debts.
Corporations, partnerships, and LLCs don't have the option of filing Chapter 13. It only applies to sole proprietors and individuals. A sole proprietor can file to have both company and personal debts eliminated.
If you are a sole proprietor who wants to keep a company in operation, but needs time to restructure, Chapter 13 can be a good option. You're allowed to retain your assets and repay creditors through a structured plan. For those owners with a lot of company assets that can't be exempted, Chapter 13 is a better plan than Chapter 7, which would require the sale of non-exempted assets. If you are a corporation, about the only thing you can do with Chapter 13 is file individually to wipe out company debt you are personally responsible for.
The biggest disadvantage to Chapter 13 is that it's limited to individuals. Corporations aren't allowed to file. It can also take a lot longer to discharge a Chapter 13. It can take three to five years of monthly payments to complete the process. If you have assets you can't exempt, you are required to pay their value to unsecured creditors in order to keep them.
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.
You may file chapter 7 personally or as the owner. If you are a sole proprietor, you will have to file as an individual because the IRS doesn't make a distinction between you and your company. A lot of owners file both ways. The discharge of business bankruptcies doesn't wipe out personal responsibility for company debts.
The advantage of Chapter 7 for sole proprietors is the ability to eliminate debt with one filing. They are allowed to exempt assets and can continue to operate their businesses. The advantage for a corporation, that wants out of a failing business, is the opportunity to walk away and let the trustee handle the liquidation of assets and repayment of creditors.
There are disadvantages to Chapter 7 filing for corporations. Their debts won't be discharged as a result of this action, and the company will be shut down. A company filing doesn't allow for exemption of assets. It won't wipe out personal debt. It is a good option for those who want out of a company, who have few company assets and aren't personally liable for company debts.
Corporations, partnerships, and LLCs don't have the option of filing Chapter 13. It only applies to sole proprietors and individuals. A sole proprietor can file to have both company and personal debts eliminated.
If you are a sole proprietor who wants to keep a company in operation, but needs time to restructure, Chapter 13 can be a good option. You're allowed to retain your assets and repay creditors through a structured plan. For those owners with a lot of company assets that can't be exempted, Chapter 13 is a better plan than Chapter 7, which would require the sale of non-exempted assets. If you are a corporation, about the only thing you can do with Chapter 13 is file individually to wipe out company debt you are personally responsible for.
The biggest disadvantage to Chapter 13 is that it's limited to individuals. Corporations aren't allowed to file. It can also take a lot longer to discharge a Chapter 13. It can take three to five years of monthly payments to complete the process. If you have assets you can't exempt, you are required to pay their value to unsecured creditors in order to keep them.
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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