How to Close a Business Through Bankruptcy

How to Close a Business Through Bankruptcy

If your business needs to shut down, bankruptcy may be one option:

• Chapter 7 (business entity): A trustee takes over, sells assets, pays creditors in priority order, and the entity dissolves. No discharge for business entities.
• Chapter 7 (sole proprietor): Your personal bankruptcy includes business debts. The business debts are discharged along with personal debts. You can start a new business after discharge.
• State dissolution without bankruptcy: If the business has minimal debts and assets, simply dissolve with the state (Secretary of State filing) and wind down operations. Cheaper and simpler than bankruptcy.
• Assignment for benefit of creditors: A state-law process where you assign business assets to a neutral third party who liquidates them for creditors. Often faster than Chapter 7.