It is essential to examine the structure and entity classification of your business to determine your responsibility for the debt.
As the sole proprietor of your business, there is legally no financial distinction between you and your business, and you are responsible for all debts owed.
If you own a general partnership, you are responsible for all business debt along with the organization, and creditors can report these debts to the credit bureaus under your name. You do, however, have the option to negotiate with creditors, which can be an excellent option for clearing some of your debt.
LLC’s offer more protection to your finances in business bankruptcies than other business entity types, as you are not personally responsible for any business debts.
Aside from entity classification, it’s also vital to examine business taxes and personal guarantee debts.
A personal guarantee means that you are agreeing to be responsible for repaying the business debt. Some creditors require these guarantees to be signed before extending credit to a business, and in business bankruptcy, this means that these debts will affect your credit score.
Taxes that you collect from sales or employee salaries must be paid to the government, or you will be personally responsible for them. This means any resulting tax lien for unpaid taxes would severely affect your credit score in business bankruptcy.
The decision to file for bankruptcy is a difficult and lengthy one that should not be done without the legal guidance of an attorney that you trust. At Parker & DuFresne we use our experience in bankruptcy law to help clients across Northeast Florida get back on the road to financial stability. Through a thorough consultation, we’ll help you determine if business bankruptcy is the right solution for your financial situation. Contact us today to learn more!
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