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When you file bankruptcy for an LLC, the company is the party filing for bankruptcy. This means that everything relating to the bankruptcy is related to the company. When you file bankruptcy for a sole proprietorship business, however, you are filing as an individual; as in a sole proprietorship, there is no legal distinction between you and the company.
Essentially, you file on behalf of the LLC, and while questions are posed to you as the LLC’s manager, it’s in a more impersonal way. Finally, with LLCs, you are seeking to clear the debt of the business, whereas with a sole proprietorship, you are clearing your personal debts that were taken on in relation to the business.
Not automatically. If you own an LLC and you file for personal bankruptcy, while the LLC as an entity is not filing for bankruptcy, your LLC will still be involved.
Essentially, the LLC will be listed as an asset. It may be an asset with no value or with plenty of value, depending on your circumstances. Your LLC could be a source of income or of debt; either way, the court will want to review your LLC’s activity and any related bank statements.
If you have an ownership interest in the LLC and the LLC has more value than you can protect, you would either have to surrender your interest to the bankruptcy court (so they can auction it off and make money from it) or pay the court whatever value you cannot protect.
For example, I had a client who was a partial owner of a car washing business. The business didn’t have a large value, but it did have some value that he couldn’t protect. As a result, we had to pay the courts for his interest in the business in order for him to keep it.
Attorney Alec Solomita is a thorough, respected bankruptcy law attorney serving Florida. Since 2007, he’s helped clients just like you prepare to file as owners of an LLC, partial owners of an LLC, or sole proprietors.
Have questions about bankruptcy, or in need of legal representation? Reach out to Solomita Law, PLLC for an initial consultation today.
In certain circumstances, yes. If I am the sole owner of a company, I’m filing for bankruptcy, and the company has assets, if the company’s assets outweigh the company’s debts, those assets probably can not be protected in bankruptcy.
If you are a partial owner of a business, the percentage you own will be applied to the business’ value for filing purposes. For example, if a business is worth $100,000 and you own 25% of that business, $25,000 will have to be reconciled with the court.
It depends. Some business owners may need to look at Chapter 11. While I don’t practice Chapter 11, it is something that is common for business owners trying to restructure debt.
If you’re filing for bankruptcy because your business did not work out, I would advise filing for Chapter 7, as your business is no longer going to be operational moving forward, anyway.
A common mistake involves business owners trying to unload or siphon assets from the LLC before they file, thinking it won’t impact their bankruptcy. It’s important to remember that any money owned by the business needs to be used for business purposes only. Trying to transfer business assets for personal use before you file could be seen very negatively by a bankruptcy court.
For more information on bankruptcy and LLC ownership, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (407) 255-7458 today.
Attorney Alec Solomita is a thorough, respected bankruptcy law attorney serving Florida. Since 2007, he’s helped clients just like you prepare to file as owners of an LLC, partial owners of an LLC, or sole proprietors.
Have questions about bankruptcy, or in need of legal representation? Reach out to Solomita Law, PLLC for an initial consultation today.
