Business Bankruptcy Or Just Close Up Shop?

[anthonyj123]

What is the name of your state? PA

I have a small remodeling business in PA. Started it just over a year ago. One of my contractors signed me into a deal that was not profitable. I'm stuck in a position where I must walk off the job. Currently I've lost $2000 on this addition and it's still a good 4-6 weeks from being completed. The remaining money in the job won't even cover it's completion... First time this has happened and it was due to one of my contractor's faults. He is the one who signed the contract.

My company is an LLC so I believe that just closing the doors might be sufficient to avoid getting sued. I also have about 20,000 in debt, 6,000 of which is personally guaranteed. Assets in equipment worth about $2,000.

Wondering what my best options are...
Bankruptcy
or Close Shop?
or any other suggestions would be welcomed...

Some important notes:
I registered the company as an LLC however I searched for my business documents and I only see a fictitious name filed...
I don't see any articles of incorporation, which may mean that my LLC status may not be complete??
I am a joint owner on a piece of property with my dad.

Would appreciate any insight on my situation. I am in a pretty bad position due to the promise made by one of my contractors.

 

[LdiJ]

What is the name of your state? PA

I have a small remodeling business in PA. Started it just over a year ago. One of my contractors signed me into a deal that was not profitable. I'm stuck in a position where I must walk off the job. Currently I've lost $2000 on this addition and it's still a good 4-6 weeks from being completed. The remaining money in the job won't even cover it's completion... First time this has happened and it was due to one of my contractor's faults. He is the one who signed the contract.

My company is an LLC so I believe that just closing the doors might be sufficient to avoid getting sued. I also have about 20,000 in debt, 6,000 of which is personally guaranteed. Assets in equipment worth about $2,000.

Wondering what my best options are...
Bankruptcy
or Close Shop?
or any other suggestions would be welcomed...

Some important notes:
I registered the company as an LLC however I searched for my business documents and I only see a fictitious name filed...
I don't see any articles of incorporation, which may mean that my LLC status may not be complete??

Would appreciate any insight on my situation. I am in a pretty bad position due to the promise made by one of my contractors.

Because you have personally guaranteed some of the debt, I think that its likely that the corporate veil can be pierced even if your LLC filings were complete. You may have to file personal bankruptcy. I would not bother to file business bankruptcy...personal bankruptcy will basically take care of all of it.

 

[adjusterjack]

I believe that just closing the doors might be sufficient to avoid getting sued.

Nothing "avoids" getting sued. And with a single member LLC the member and the LLC are hardly distinguishable which makes it easy to pierce the corporate veil.

 

[anthonyj123]

Should I be concerned if I'm a joint owner on a piece of property with my dad? I don't want my dad to have to deal with any of the nonsense that I'm wrapped up in now.

 

[doucar]

Could be, it would depend upon the equity in the property, and the amount of exemptions you have available to you under state law. Your best be would be to consult with a local bankruptcy attorney about your options. Just closing the doors is not a real option.

 

[LdiJ]

Should I be concerned if I'm a joint owner on a piece of property with my dad? I don't want my dad to have to deal with any of the nonsense that I'm wrapped up in now.

Depending on the overall circumstances you might be able to transfer ownership of the property to your dad fully. You need a consult with a local attorney.

 

[despritfreya]

1. If the LLC was not properly formed and your state (through statue or case law) does not recognize de facto corporations, all debt is your debt.

2. If the LLC was properly formed and/or a de facto corporation exists, the only debt you are responsible for is that debt which you personally guaranteed. Piercing the corporate veil comes into play if you did something wrong such as raid the corporate coffers, committed some fraud while acting as an agent of the LLC, violated some state law such as failure to abide by any prompt pay statues, hold funds for a sub contractor in trust and fail to turnover the funds, etc.

3. If you plan on keeping your contractor license you need to check with your state’s ROC. In Arizona, the ROC wants to see the entity file bk (Chapter 7). It will then issue a new license to the qualified party, closing out any that relate to the bankrupt business.

4. Never transfer property. Leave your name on your dad’s property. As suggested, talk to an attny. If you have no equitable interest in the property you are probably safer, in the context of a bk, to leave the title alone. Transferring anything while contemplating bk looks a lot worse then leaving the ownership as is and explaining the situation.

Des.