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In a business partnership and need to file personal bankruptcy

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  • In a business partnership and need to file personal bankruptcy

    Hi there
    I have a small business partnership with a friend that has been struggling over the last two years. I have financed the company with a credit card attached to my name and the business name - my partner is not on the credit. We finally found a buyer for the business that would take over the debt and pay us each a small amount $1000.

    I have another credit card under the business name as well that i rolled over some of my personal debt to that I have stopped making payments on. My attorney says that the bank could go after my partner if I sell the company to the new buyer and the best thing to do is just close the business, reopen in just my name and not sell it as the new company could get drawn into this mess as well.

    I certainly don't want my partner to get penalized for any of this, so we have decided just to close the business permanently. Is it ok to try to sell off the inventory we have left and then divide up what we have left in the bank account? the other thing is that one of our accounts wants to take over 2 of the designs we have. Can we sell them the rights to this or will that look bad that I have profitted right before we sell the business.could this company get in trouble at all? We are still current on the credit card payments, but I have stopped all my other payments 2 months ago. My attorney ( actually just the advisor that I am working with, never met the attorney) said we will wait to file until 3 months after we close down the business so that my partner will not be held liable. Is this really enough time since we have to show 6 months of business bank statements?

    I guess what I am asking is how do i close down the business ( liquidate) sell any designs, and disburse the ending funds the right way, without the courts
    having a problem with it?

    Just want to do things on the up and up, but be able to get something for the business. Any insight or suggestions would be appreciated.

  • #2
    I'm sure with a partnership there are other concerns, and these will vary from state to state. I can tell you my process, but you should discuss with an attorney who is specifically experienced in business bankruptcy, especially partnerships, to avoid dragging your partner down with you.

    When I decided to file I was the owner of an LLC in Texas. I consulted with two different lawyers, who advised me that the LLC would be considered an asset of mine, and something that could potentially be seized in the bankruptcy. Since I was closing the business regardless I simply accelerated that process. Over the course of a few months my process was:

    -hold a closing sale to sell as much inventory as possible
    -sell fixtures, equipment, etc on Craigslist, eBay, etc
    -sold the remaining business-owned items (the last of the inventory, product-specific displays etc) to a similar business in another city
    -attempted to sell my accounts receivable but had no luck - all of that paperwork is going to the bankruptcy court.

    I took all of that revenue and used it to live on until I found a job. Once I had steady employment I spent some of it on fixing up the house and other needs. Through all of that I was careful to keep up the books and record all of my withdrawals as draws from the business so everything is lined up properly for my accountant when tax time comes around. I have a few tools left over that I'm exempting in the bankruptcy as "tools of trade" since my new job is in a similar industry and the tools are useful.

    I assume that your stake in the partnership would also be considered an asset. If your goal is to protect your partner you can probably do that but you may need to wait a while. Follow you attorney's advice, I'm sure he is much better versed in the laws and customs in your particular state and district than anyone on this forum.

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