Operating a small business is not easy. When you hear people tell their business success stories, a part of the story usually goes, “After X years, our business became profitable.” This means that, for the first few years that the company was conducting business, it was operating at a loss. If the idea of paying just enough towards your debts to avoid a default stresses you out, then entrepreneurship is going to be a bumpy ride. In the first few years of a business venture, the goal is often to borrow as much as you can and then pay just enough of it back to enable you to borrow more. Debt-free is for when you hit the big time, which most businesses never do. The chances are greater that you will eventually have to decide to cut your losses and go back to a 9-to-5. At various points in your entrepreneurship career, you may need to restructure your business debts or file for bankruptcy in order to get a fresh start after a failed business venture. To strategize about getting out of debt after closing one business and before opening another, contact an Oakland Chapter 7 bankruptcy lawyer.

When are You Personally Liable for Debts of a Business You Own?

One of the first decisions you make in a business venture is also one of the most important: your choice of an entity designation. Whether you incorporate your business as a sole proprietorship, S corporation, C corporation, or limited liability company (LLC) makes a big difference. If the business is a sole proprietorship, it does not pay taxes separately from you, and you can be personally liable for its debts. The other types of business structures are legally separate from their owners in terms of tax obligations and liability for debts, although the details vary from one business structure to the next. If you have just closed a sole proprietorship and are unable to repay the business debts related to it, a Chapter 7 bankruptcy filing is a good solution. Knowing when to file for bankruptcy for other types of business entities is more complex, and you should work with a bankruptcy lawyer and with your business partners to decide what to do.

Sometimes Businesses Can Settle or Restructure Their Debts Without Filing for Bankruptcy

The right to file for bankruptcy protection when you cannot repay your debts applies to business entities as well as to individuals. In fact, chapter 11 bankruptcy protection is designed especially for businesses. Filing for bankruptcy might not be the most effective way for a business to get debt relief. Businesses have more flexibility than individuals when it comes to settling, renegotiating, or restructuring their debts. In other words, businesses are often able to work out a debt repayment solution with their creditors, and often with the help of lawyers, without going to court.

Contact the Law Office of Melanie Tavare About Business Bankruptcy Cases

A bankruptcy lawyer can help you if you are considering filing for bankruptcy for a small business. Contact the Law Office of Melanie Tavare in Oakland, California, or call (510)255-4646 for a free case evaluation.