Businesses fail for all kinds of reasons. Maybe you had a supplier who retired or went out of business, and you can no longer source crucial materials for a product that you make. Perhaps demand for the services your company provides has declined as the industry has shifted to a different standard.
When your company’s expenses and liabilities exceed its revenue and that trend shows no sign of reversing, you may have to accept that your business has run its course and needs to close. Rather than just shutting your doors and calling it quits, you may want to consider your filing Chapter 7 bankruptcy for the business as a means of finalizing its closure and protecting yourself from liability as an owner.
Filing Chapter 7 bankruptcy for a business ends company responsibilities
While you may not have opened your storefront or had staff in your factory for weeks, your landlord still expects you to pay rent as promised in your lease. Commercial leases often have terms that last for three or five years.
Your obligation to pay rent doesn’t end just because the company goes under. Your landlord can enforce the lease and demand that you continue paying them. Bankruptcy will give you an opportunity to not only discharge unpaid rent but also end your obligation to keep paying rent in the future.
Bankruptcy proceedings can also help your company renegotiate the end of contracts with suppliers, employees and others to whom you have financial obligations.
Bankruptcy prevents those debts from affecting your personal life
Regardless of the form your business takes, you have some small amount of risk when your company fails. Even if you have a corporation, creditors could ask the courts to pierce the corporate veil and hold you financially responsible for the debts and obligations of the business.
By seeking the discharge of those debts in bankruptcy, you prevent creditors from taking extreme actions in the future which might hinder you from moving on after the closure of the company. Sitting down to determine if the business at its current level of revenue qualifies for Chapter 7 bankruptcy can be a good starting point if you want to protect yourself when dissolving a business.