Can My Business File for Bankruptcy Without Impacting My Personal Finances?
Is your South Florida business struggling, and is bankruptcy looking like a possibility in the future? If so, you are likely wondering: can my business file for bankruptcy without impacting my personal finances? For small business owners, understanding the financial and legal relationship between the business and the business owner (or owners) with regard to a bankruptcy filing can be complicated, but an experienced West Palm Beach bankruptcy attorney at Kelley, Fulton, Kaplan & Eller can assist you with your case and can provide you with the information you need.
In the meantime, we can tell you more about business bankruptcies and business owners’ personal finances. Generally speaking, business bankruptcies are separate from a business owner’s personal finances, but there are some circumstances in which a business owner’s personal finances will be impacted by the business bankruptcy.
Most Business Structures Are Separate Entities
In general, small businesses are often separate entities from the owner or owners of the business. In other words, many small businesses in south Florida are structured in such a way that the business is its own legal entity, which means the business is completely separate from any of the owners of the business. Accordingly, in these situations, a business bankruptcy filing will not impact the personal finances of any of the business owners. Common types of business structures for which this is generally true include partnerships (including limited partnerships, or LPs), limited liability companies (LLCs), and corporations (including C-corps and S-corps).
Exceptions to Know: Personal Financial Involvement in Business Bankruptcy Cases
There are a couple of important exceptions to consider when you are planning a business bankruptcy and concerned about how or whether your personal finances could be impacted by your business bankruptcy case.
First, if your business is structured such that it is a separate entity (as discussed above), if you made any personal guarantees on business loans, you will still be personally liable for those loans if the business files for bankruptcy. In addition, any commingling of personal money with business money in one of the business structures discussed above could result in your personal finances being impacted by the bankruptcy case.
Second, if your business is structured as a sole proprietorship, your business is not a legal entity that is entirely separate from you as an individual in a bankruptcy case. Rather, you and the sole proprietorship are one and the same for bankruptcy purposes. Accordingly, when a sole proprietorship files for bankruptcy, all personal finances are included, and vice versa (when an individual files for bankruptcy and owns a sole proprietorship, the sole proprietorship is fully impacted).
Contact Our West Palm Beach Bankruptcy Lawyers Today
Business bankruptcies can be extremely complicated, and it is important to have one of the experienced West Palm Beach bankruptcy attorneys at Kelley, Fulton, Kaplan & Eller on your side from the beginning of your bankruptcy filing. As we have discussed, whether or not personal finances will be impacted by a business bankruptcy filing will depend upon the structure of your business and type of bankruptcy filing, as well as the existence of any circumstances where your personal assets were commingled with business assets or where you made personal guarantees. Contact Kelley, Fulton, Kaplan & Eller today to learn more about a business bankruptcy filing in South Florida.