What should businesses know about bankruptcy?

There are many thriving businesses in Hartford, Connecticut. However, some businesses go awry, and things may get to the point of the business owners considering business or commercial bankruptcy. When that happens, the business owners should ask some key questions and discuss the answers with other stakeholders in order to determine if bankruptcy is the right path.

Why do businesses get to the point of considering bankruptcy?

Businesses get to that point for many reasons. Of course, one is that the business may have been mismanaged. Another common one is simply having taken on too many financial obligations. For example, opening lines of credit to fund inventory that then did not sell completely. That can happen if popularity of what the business sells was misjudged, or if a competitor sold comparable items that more people wanted.

What is a good reason to file for bankruptcy?

If the business is not viable and your personal assets are not at risk, you may just want to end the business without pursuing bankruptcy. However, if your personal assets are at risk, bankruptcy can be a way to shield your personal assets from creditors of the business.

What if I have a limited-liability company (an LLC)?

Many small business owners set up their company as an LLC specifically to protect their personal money and possessions from being lost if the business goes awry. However, your personal money and possessions may still be at risk even with an LLC, which would make bankruptcy worth considering.

If a court finds excessive overlap between your personal finances and the business’ finances, your assets could be at risk. It is also true if you made a personal guarantee to the lender that provided the financing to start the business with.