Of course, the outcome and routes to get there vary depending on a variety of factors, and having a skilled business bankruptcy lawyer by your side to effectively analyze your business, finances and possible routes to recovery is your best bet.
Sole Proprietorships Have It Tough
If you are a sole proprietor filing for bankruptcy, the trustee may require the business be shut down so they can conduct an audit of the bankruptcy estate and associated assets to determine the overall value. For sole proprietors, however, bankruptcy does not always mean an immediate shut down – it depends on who you are in relation to the business, associated assets and how the business can be expected to perform during the course of the bankruptcy.
For example, businesses without additional assets, like freelancers, vendors or consultants may be allowed to keep their doors open throughout the bankruptcy process. Especially when it is evident further debt will not accumulate and the risk of incurring a legal liability is low for the business, they may continue to operate. A good business bankruptcy lawyer will be able to help you determine how much of your business operations will need to change during bankruptcy.
Keep in mind, though, that any proceeds the business generates while under bankruptcy – including past-due collections paid after the bankruptcy was filed – become a part of the bankruptcy estate.
LLCs Have It Tougher, but a Business Bankruptcy Lawyer Can Help
In most business bankruptcies, the LLCs assets are sold and then used to pay off the creditors. After the bankruptcy wraps, the remaining debts are eliminated and the LLC dissolves. However, LLCs with multiple members or partnerships are a different story. While laws vary from state to state, unless you are a majority owner the trustee cannot interfere with the membership, LLC or its assets.
If you share ownership of the business with other members and are not the majority shareholder, your business may be saved from liquidation. Trustees have the right to vote shares, they typically will have a hard time forcing the dissolution of the company. Even though your shares are still tied to your bankruptcy estate, they do not present much value to the trustee unless they can be purchased by one of the other shareholders / owners.
There are different agreements companies likely have in place dictating the liability each member has regarding the company’s finances and debts, including whether you are required to relinquish your ownership before filing for bankruptcy. For this reason, it definitely pays to have a business bankruptcy lawyer on hand to help comb through the different agreements to avoid violation and possible lawsuit from your own company.
Trust CMC Law, Business Bankruptcy Lawyers in Atlanta
If you and your business are facing financial struggles and are considering filing for bankruptcy, secure the right business bankruptcy attorney and call the attorneys at CMC Law. There are options for every type of business, and we want to help you on the road towards recovery, and eventually, success!
Give us a call at (404) 585-0040 or fill out our online contact form to connect with one of our business bankruptcy lawyers – we’re here to help!