If you are a struggling business owner in Florida, you may wonder if you can file for bankruptcy. Bankruptcy is a legal process that allows owners and businesses to get relief from their debts. But, not all businesses are eligible for all bankruptcy types.
The first thing to consider is the legal structure of your business. If your business is a sole proprietorship, you and your business are considered one entity for legal purposes. This means that you are personally liable for all the business debts and obligations.
If you file for bankruptcy as a sole proprietor, you file personal bankruptcy that affects both your business and personal assets and debts. You can choose to file either Chapter 7 or Chapter 13 bankruptcy, depending on your income, assets and goals.
If your business is a partnership, you and your partners share the ownership and management of the business. You are also jointly and severally liable for the debts and obligations of the partnership. This means that each partner can be held responsible for the entire amount of the partnership’s debts, even if they did not personally incur them.
If you file for bankruptcy as a partner in a partnership, you file personal bankruptcy that affects both your business and personal assets and debts. However, unlike a sole proprietorship, you cannot file Chapter 13 bankruptcy as a partner in a partnership. You can only file Chapter 7 bankruptcy, which will liquidate your business and personal assets to pay off your creditors.
Corporations and LLCs
If your business is a corporation or an LLC, it is considered a separate entity from its owners (shareholders or members). This means that you are not personally liable for the debts and obligations of the corporation or LLC, unless you personally guaranteed them or committed fraud.
If you file for bankruptcy as a shareholder or member of a corporation or LLC, you file a separate bankruptcy for the business entity that will not affect your personal assets and debts. You can choose to file either Chapter 7 or Chapter 11 bankruptcy for your corporation or LLC, depending on the size, assets and goals of your business.
Chapter 11 bankruptcy
Chapter 11 bankruptcy is designed to help businesses that have valuable assets and ongoing operations to restructure their debts and continue operating under a court-approved plan.
Chapter 11 bankruptcy allows you to negotiate with your creditors to reduce or modify your debts (interest rates, payment terms, principal amounts, etc.) while keeping your assets and business intact. Chapter 11 bankruptcy is usually more complex and expensive than Chapter 7 bankruptcy, but it also gives you more control and flexibility over your business.