We started an audio/video, home theater business about 5 years ago and both my partner (in business and in life) and I have been working in the business full time for the past two years. Within that five years we did what we thought was right and started a secured line of credit with the bank, got business credit cards and opened net term lines with our distributors. We also were doing pretty well and moved into a new house and began the climb into personal debt as we thought the business would sustain us.
About a year ago the business started to fall off and we began to struggle with paying our distributors because we had to keep cash on hand to float not only the next job but a builder that we were doing work for that wouldn't pay for 45 days or more. In our industry you really can't ask a prospective client for more than 50% down and expect to get the job. Of course this is when we started losing he ability to pay ourselves enough to keep up with our personal debt as well.
So, at this point we have used all savings, maxed out credit and have begun to damage our credit due to late payments, etc. So we have begun to think about bankruptcy for the business and personally (both of us). The problem now is that we have formed a new S-Corp business recently and have gotten investors to put up the money to fund the business.
So, our question becomes...what happens to the new business and its investors if we file on the old business and personally since we are personally tied to the old business' debt?
About a year ago the business started to fall off and we began to struggle with paying our distributors because we had to keep cash on hand to float not only the next job but a builder that we were doing work for that wouldn't pay for 45 days or more. In our industry you really can't ask a prospective client for more than 50% down and expect to get the job. Of course this is when we started losing he ability to pay ourselves enough to keep up with our personal debt as well.
So, at this point we have used all savings, maxed out credit and have begun to damage our credit due to late payments, etc. So we have begun to think about bankruptcy for the business and personally (both of us). The problem now is that we have formed a new S-Corp business recently and have gotten investors to put up the money to fund the business.
So, our question becomes...what happens to the new business and its investors if we file on the old business and personally since we are personally tied to the old business' debt?
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