Starting a small business is a challenging and often rewarding process. However, reports have indicated that 80 percent of small businesses end up closing their doors within 18 months of starting operations. This means that no matter how hard you aim for successful entrepreneurship, you may have to say goodbye to a business venture.
If your business is not succeeding, chances are you have debts that your company cannot pay. Whether these debts are for investment loans, goods from vendors, lease agreements, or other types of contracts, it can be difficult for a business with insufficient profits to repay creditors. This is why many small business owners look into filing for bankruptcy as they close their doors.
Chapter 7 Bankruptcy for Businesses
The most common type of bankruptcy for small businesses is Chapter 7. Chapter 7 will liquidate any remaining assets of your business to pay your creditors as much as possible. After your business is liquidated, your remaining debts can be discharged, and you can close up shop.
In some cases, small business owners actually have to file for personal bankruptcy to relieve their company debts. In the following types of business structures, the debts of the owner and the debts of the company are one and the same:
- Sole proprietorship
- Simple partnership
If you own either type of business, you can file for bankruptcy to seek discharge of your company’s debts and include your own personal loans, credit cards, legal judgments, certain back taxes, past-due rent, and more.
Chapter 11 bankruptcy is the other type of bankruptcy commonly used by businesses. While Chapter 11 does allow a company to get debt relief and remain in operation, this is a costly and long-term process that is commonly used by large-scale corporations and not startups or small businesses.
Find Out How a St. Louis and St. Charles Bankruptcy Attorney Can Help You
If you would like more information about either personal or business bankruptcy, do not hesitate to call our bankruptcy lawyer at the Law Offices of Kenneth P. Carp. We are here to help you find financial relief, so please call our St. Louis office at 636-947-3600 today.