February 2007

27 Feb Can I File Bankruptcy Without Affecting My Incorporated Business?

Cathy Moran recently discussed business debts in bankruptcy in her post entitled Bankruptcy & Small Business, but what if you have incorporated your business? Can a bankruptcy trustee take your business if you file a Chapter 7 Bankruptcy? After all, you went to the trouble of incorporating because it created a separate entity, and you learned from somewhere that people incorporated their small business to insulate themselves from liability. If the corporate entity can protect the shareholder from business liability, can the shareholder protect the corporate entity from personal liability in bankruptcy? The answer is simply that the corporate entity is not protected if the shareholder files for bankruptcy protection.
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