Small Business Wind Down
Many self-employed individuals operate their business as a separate legal entity such as a small corporation or limited liability company (“LLC”). Corporations and LLCs have legal existence of their own, which means that hey can be sued as though they were separate individuals. Sometimes self-employed clients wish to continue their business but file bankruptcy to get rid of debts that the business has accumulated. This presents some difficulty because corporations and LLCs cannot get a discharge in bankruptcy. Therefore, if the owner files personal bankruptcy and is relieved of his or her obligation to repay the debt, it may remain difficult to continue with the business because creditors will sue the business separately and garnish its assets and bank accounts.
However, under some circumstances it is possible to wind down and eliminate the corporation or LLC, and then file personal bankruptcy. The effect of doing this is that all of the debts are cancelled and it is possible for you to continue operating the business, as a sole proprietorship, going forward without having to worry about creditors taking assets or garnishing your accounts. Your attorney can discuss these strategies with you if you are facing this circumstance