Why Does My Company’s Principal Place of Business Matter for Bankruptcy?
Is your business having financial difficulties, but there is a strong desire among the owners to keep the business operational? If so, you may be considering the possibility of Chapter 11 bankruptcy or another type of reorganization bankruptcy, such as Subchapter V, which is designed for smaller businesses with less debt. Through a business reorganization bankruptcy, your company can restructure debts and become current with creditors, all while keeping your business open and operational. Once you begin researching options for your business, you may come across information about “domicile” and “principal place of business.” Why do these terms have any bearing on a bankruptcy filing?
In short, if you have a business with at least one location in Florida but the business also has ties to one or more other states, you will only be able to file for bankruptcy in Florida if Florida is the principal place of business, or if your business is understood to be domiciled in Florida. What does this mean? Our experienced West Palm Beach bankruptcy attorneys can tell you more.
A Business Filing for Bankruptcy Typically Must File in the State of its Principal Place of Business
Your business’s principal place of business is typically where your business must file for bankruptcy. According to the United States Courts: “A Chapter 11 case begins with the filing of a petition with the bankruptcy court serving the area where the debtor has a domicile, residence, or principal place of business.” A business does not have a residence (this is relevant for individuals filing for Chapter 11 bankruptcy), and a business’s domicile is often the same as its principal place of business. A “domicile” is the legal home of the business, in effect.
What is a “principal place of business”? According to the Cornell Legal Information Institute (LII), “a principal place of business generally refers to where a corporation’s officers direct, control, and coordinate the corporation’s activities.” These are the factors that make up the “nerve center” of the business.
Where Is My Business’s Principal Place of Business?
Many businesses in South Florida will not need to struggle with the question of the principal place of business because it will clearly be in West Palm Beach or another area of South Florida. At the same time, South Florida businesses with multiple offices and connections to other states may need to address this question.
How do you determine your principal place of business, and whether your business can file for Chapter 11 bankruptcy in Florida? The US Supreme Court has decided that the “nerve center” test is what determines the principal place of business — those factors we noted above. And, importantly, a business can only have one principal place of business.
Contact Our West Palm Beach Bankruptcy Attorney Today
If you own a business that has locations outside the state of Florida, or if the business is incorporated in another state, it will be especially important to seek legal advice about your business’s principal place of business and where you can initiate a Chapter 11 or other reorganization bankruptcy case. Do not hesitate to reach out to an experienced West Palm Beach bankruptcy lawyer at Kelley, Kaplan & Eller to discuss the details of your business, and the possibility of moving forward with a business reorganization bankruptcy in Florida. Contact our firm today to learn more about how we can assist you.
Sources:
uscourts.gov/court-programs/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics
law.cornell.edu/wex/principal_place_of_business
