When your incorporated business fails, you may be more at risk than you think.
I know you incorporated to separate yourself as the owner from the risks of the business. The corporation is a separate legal person, distinct from the individuals who own the stock in the corporation.
But when the business has to shut down, the actual degree of separation is tested.
You’ve got to know if the business can safely file bankruptcy.
Or, will using bankruptcy to shut down the business drag the owners down as well?
Can this corporation safely file bankruptcy?
Businesses looking to go out of business typically file Chapter 7. The business closes, a trustee is appointed, and any valuable assets are sold for the benefit of creditors.
The trustee then controls the corporate checkbook and the timeline on which creditors get paid through the courts. [Read more…]