An entrepreneur may have felt the financial pinch of a failing business long before they started considering the closure of their company. Entrepreneurs often invest a huge amount of their personal resources into their businesses and may limit their personal income opportunities while trying to start a successful endeavor. Their own pay is often the first thing to shrink when a company starts to struggle.
In some cases, those financial struggles will continue after the business closes because the owner ends up responsible for its debts. Whether a business succeeded for years and then began to struggle due to market changes or it never got off the ground, the person who owns the company may eventually come to recognize that they are on the hook for business-related liability even when their enterprise is no longer operational. As a result of this risk, filing for bankruptcy is often an important part of the process of winding down a business.
Closing a business requires a lot of careful planning
A failed organization could have tens of thousands of dollars in debt. Entrepreneurs and owners may also need to consider a Chapter 7 bankruptcy if they want to protect themselves from the possibility of personal liability for the business debts left unpaid.
In some situations, creditors can come after owners and entrepreneurs. Those who start businesses often have some degree of responsibility for the company. Even if someone starts a limited liability company (LLC) so that they don’t have to worry too much about personal financial responsibility, small mistakes could lead to creditor claims against them as an individual.
Both regulatory non-compliance and financial commingling are reasons that a judge might allow a creditor to bring a claim against a business owner for debts owed by the business. If someone discharges those debts in a Chapter 7 bankruptcy while closing their company, they potentially protect themselves from any personal responsibility they might otherwise have when the company closes.
Rather than rushing to close a company as fast as possible and move on quickly, entrepreneurs and company owners will likely benefit from thoroughly reviewing their personal liability and seeking to minimize it. Learning more about Chapter 7 bankruptcy can benefit those who are concerned about their assets and future income while navigating a business closure. Connecting with an experienced legal professional is often the best way forward under these circumstances.