08 Feb Do I have to file bankruptcy for my corporation?
Do you own your own business? Are you thinking about bankruptcy? Then you also may be asking “Do I have to file bankruptcy for my corporation?” as well. The answer is – “not necessarily.”
It’s important to remember that you and your small subchapter S corporation are two different things for bankruptcy purposes. Your wholly-owned corporation has its own tax ID number, its own assets and its own liabilities. These are distinct and different from your own. What you, an individual, own is the stock in the corporation.
If you file your own bankruptcy, what “goes into” the bankruptcy is your stock in the corporation, not the assets of the corporation.
So, if the corporation is not doing all that well, losing money, has assets less than liabilities, then your corporation’s stock will have little, if any, value in bankruptcy. A trustee in bankruptcy won’t bother selling it. You might even be allowed to carry on the operation of your business uninterrupted.
It’s very important for you to be sure to include any claims others have against you because you were the owner of the corporation. These can be clear and definite, like guarantees of debt. Or they may be just threats because you were the sole owner. Tell your lawyer about them and he or she will guide and advise you.
If you decide you want or need to close down your corporation, you have a few options:
- File a separate bankruptcy for the corporation
- Close down the corporation through dissolution under state corporation law
- Assign the assets to an assignee or receiver for the benefit of creditors, again under state law
- Allow a secured creditor to foreclose on all the assets of the corporation, leaving nothing for creditors.
Laws vary from state to state. Lakelaw reprepesents small business owners in bankruptcy in Illinois and Wisconsin.
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