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Bankruptcy For Business - Will I Lose My Incorporated Business?

 

Keywords: incorporated business, bankruptcy, revenue source, assets, stock, estate, liens, liquidation value, debt

 

If you are considering filing for bankruptcy, but you own an incorporated business, you're probably wondering if your personal bankruptcy will mean small business bankruptcy as well. Especially if the business is a viable revenue source, you want it to keep operating after your bankruptcy discharge.


The common belief is that personal bankruptcy won't affect an incorporated entity. After all, you incorporated your business to separate your personal liability from your business risks, right? If incorporation protects you from corporate liability, shouldn't it also protect the business from your personal liability?


Unfortunately, the business is not protected if you file for bankruptcy protection. Although you do not technically own the corporation's assets, you do own the stock. Since stock is just ownership rights to the business, your stock (and the ownership of the corporation) will transfer to the estate after you file for bankruptcy protection.


Because the estate then owns the stock, the trustee can liquidate the assets of the company to pay your creditors. Once the assets are liquidated, the corporation will most likely have to cease business operations - just as if you had filed for small business bankruptcy.


If you want to keep your business operations going, you do have the option of buying back the stock from the estate at fair value -the liquidation value of the stock. Since the liquidation value typically isn't very high, especially if the corporation's assets are subject to a bank's lien, this can be a good option for eliminating your personal debt while still keeping your business running.


If you are considering filing for personal bankruptcy, it will be worth your time to determine the fair value of your corporate stock, so you will know how much you will need to buy back your business from the estate once your bankruptcy petition is filed.


Source: http://ezinearticles.com/?Bankruptcy-For-Business---Will-I-Lose-My-Incorporated-Business?&id=2325480 

 

 

 

 

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