The Wink Law Firm’s Team of Denver Bankruptcy Attorneys Answers Your Questions
When a small business is challenged by debt, and its creditors aggressively start seeking payment on bills the business can’t pay, the owner may start looking into ways to restructure their debt, close the business, or find some other debt settlement solution to manage their financial difficulties.
The Wink Law Firm’s team of attorneys has worked with many small businesses successfully, enabling business owners to find strategic solutions that work best for them, minimize their business debt, and move forward into a brighter financial future.
While a free consultation with our team of bankruptcy attorneys near you can begin the process of providing personalized, informed strategy on how to handle small business debt, here are the general – but important – points we explain to all of our clients who are considering filing for bankruptcy.
Our team of Denver bankruptcy lawyers will walk you through several approaches to business debt, including how a small business might restructure, or even move into a new chapter of your life.
Ready to learn more? Contact our bankruptcy lawyers in Denver to schedule a consultation of your own, and get down to the specifics of your case, so we can help you find the solution that will work best for you.
Business Debt 101: Defining Sole Proprietorships and Business Entities
An understanding of how you categorize your business is essential to beginning a strategy for business debt through bankruptcy. Let’s start with some definitions.
A sole proprietorship is a business in which there is no legal difference between the person and the business. Think of an entrepreneur, for example, who takes wedding photographs. This person doesn’t work with or for anyone else, bills their clients directly, and pays their own taxes. The photographer hasn’t hired anyone, hasn’t paid any formation fees for starting a business, and all of the incoming and outgoing payments and fees go directly through the photographer’s checking account. In short, a business owner who is a sole proprietorship is personally responsible for all business debt because there is no difference between the business and the owner.
A business entity is typically an LLC or corporation. In this case, the business owner has separated their personal assets from the business’s assets. Technically, the business owner owns the LLC or corporation, and this legal entity actually owns the business assets. These business entities’ first advantage is that they protect the business owner from personal liability. Additionally, there are tax breaks that business entities can benefit from.
The reason why we define these terms is to help you understand the best approach for your business debt, as the options available to you as a sole proprietor or the owner of a LLC or corporation are different.
Options for Sole Proprietorships to Resolve Small Business Debt
As a sole proprietorship, you can file for personal bankruptcy, because your business and your personal debts are one in the same. Sole proprietors can then file for Chapter 7 or Chapter 13 bankruptcy. With the assistance of an expert Denver bankruptcy lawyer, you can have $60,000 of your business assets exempted from bankruptcy.
The Wink Law Firm can expertly guide you through personal bankruptcy with a strategy that will benefit you the most during this difficult time. Whether we’re assisting our clients with debt settlement or bankruptcy in Denver, we ensure high-quality, expert legal advice to help you during this challenging time.
Options for Business Entities Struggling with Small Business Debt
While business entities such as LLCs protect the business owner from some liabilities, business owners generally sign as a personal guarantor on their business loans and leases. This means that the individual business owner is personally responsible for debt that a business has incurred and doesn’t pay.
A business owner of an LLC or corporation can file for personal bankruptcy – just as sole proprietors are able to do – but may end up losing corporate assets, which can be sold by a bankruptcy Trustee in certain cases.
Some business owners elect to put the LLC or corporation into bankruptcy, which can be done in Chapter 5, Chapter 11 bankruptcy, or Chapter 7 bankruptcy. While Chapter 5 can be beneficial to small businesses, Chapter 11 is just too costly for a small business, and Chapter 7 simply liquidates the business assets. Unfortunately, business bankruptcy doesn’t necessarily do anything to protect the owner from guaranteed debt.
However, there are solutions for small business owners who have incorporated their businesses, and The Wink Law Firm, the premier bankruptcy attorneys near you, have developed strategies for helping business owners in this position. The basis for one strategy is dissolving the corporation or LLC, and then filing personal bankruptcy under Chapter 7 or 13. Because the corporate entity will no longer exist, it is essentially out of debt. And the owner filing personal bankruptcy will remove his or her liability for guaranteed corporate debt. And the dissolution of the corporation or LLC doesn’t necessarily mean the owner is out of business. Rather, it can mean the owner simply restructured into a sole proprietorship. In this way, this strategy can enable the business owner to get out of debt while staying in business.
Chapter 7 Bankruptcy for Business Owners Struggling with Business Debt
Under Chapter 7, a business owner can file for personal bankruptcy, protecting them from the personal liability they have, as they likely guaranteed their business loans.
Remember, again, that even with the personal liability coverage that a corporation benefits from, this liability does not extend to situations where a business owner guarantees corporate debt. Therefore, you can consider Chapter 7 bankruptcy as an option to erase your personal liability for corporate as well as personal debt. To keep the business running and to protect business assets, some business owners consider operating as a sole proprietorship in advance of filing for bankruptcy. This can enable the small business owner to protect the business assets because one may only exempt property owned personally and generally cannot protect their interest in a corporation or LLC. For example, Colorado’s tools of the trade exemption allows one to protect up to $60,000 worth of assets related to your primary source of income. This exemption is not available for any assets held through corporation or LLC because, in such a case, the debtor technically owns the corporation or LLC, which is the actual owner of the assets.
However, it is important to work with an experienced bankruptcy attorney near you who understands Colorado law, is committed to assisting small businesses in the community, and who can take a look at your debt to determine what is exempt, what is actually dischargeable debt, and more.
Fortunately, Denver bankruptcy lawyers The Wink Law Firm have helped small businesses and their owners achieve the best possible debt settlement outcomes, making the process far more efficient, transparent, and successful.
Chapter 13 Bankruptcy for Business Owners Struggling with Business Debt
Under Chapter 13 bankruptcy, a business owner can file for bankruptcy personally, then begin a three- to five-year payment plan to pay off business debt. Some business owners who plan to continue running their businesses – and are hoping for profitability during this repayment plan – can get back on their feet while the business continues to operate. This potentially ideal situation can be navigated with the help of knowledgeable bankruptcy attorneys near you, who have a depth of understanding and experience about business owners in this particular position, and how they can work through this difficult time and achieve a better outlook for their futures.
Make a Strategic Plan for Your Business Debt: Get Started with Denver’s Leading Bankruptcy Lawyers
As we’ve detailed here, there are various circumstances and potential outcomes for small business owners, depending on their situation, their goals for the future, and – of course – if they decide to tap the resources of an excellent Denver bankruptcy lawyer.
We’ve provided this information in advance of our free consultation to help you make a decision that you feel will be best for you and your business; however, we also hope to present the entire scope of possibilities for you when you visit one of our offices.
Our free consultations always begin with understanding your past, present, and future as a business owner, so that we can tailor a solution that is satisfactory to you, based on the many bankruptcy and debt settlement cases we’ve handled for business owners in the past.
Get started on a beneficial solution for your business and for yourself. Call us at (720) 523-0620, or send us a message online. Our team of bankruptcy attorneys near you want to see the best possible outcome for your business, and that begins when you tap the Denver bankruptcy lawyers well acquainted with the legal landscape: the team of The Wink Law Firm.