I am a 50% owner of a small jewelry business that I operate part time. At this time, we have very little inventory and only a few hundred dollars in our bank account. We don't have any debts. I'd like to keep the business open and return to selling after the bankruptcy. Will this be possible? Because the business has its own tax ID number is it separate from me? Will this affect my partner at all? Because the business has no real assets, will that protect it? Will I have to close the business down?
In Texas, you may be able to use federal exemptions to protect your ownership interest in the business in a chapter 7 liquidation. Since the business has little or no inventory or current value, I doubt this will be a problem for you. It is also unlikely that the trustee would have any interest in such a partnership anyway.
Filing bankruptcy is a complicated process that almost always requires the help of an experienced bankruptcy attorney. There may be other factors in your case, aside from this partnership, that need attention.
If there is a business involved, it is crucial to have a bankruptcy attorney help you. While it would always be a bad idea to file for bankruptcy without the assistance of an attorney, if you own a business it would be unthinkable.
Getting to your question. I cannot tell if the business is incorporated or not (a partnership could be a limited partnership or an LLC which you treat as a partnership). If the business is incorporated, then your shares of the company would go into the bankruptcy estate, and probably could be exempted (meaning the trustee would not or could not sell your interest) because your half of the business is not worth much without your labor. In other words, most small businesses are really just the right to go to work everyday, and most trustees know that. If the business is a partnership (as you state) or joint venture, then your interest in the business goes into the estate, but the analysis is a little more complex. However, the concept is the same, your INTEREST in the business becomes PROPERTY OF THE BANKRUPTCY ESTATE but then EXEMPTED under the law of the your jurisdiction. If the business is a sole proprietorship, but one is acting as a de facto silent partner, then that requires a different analysis.
Based on your question, and the little information I know, you should be fine, but please consult with a qualified bankruptcy attorney in your area before going any further.
I would suggest that you get together an asset and liability statement to show the value of the business and profit and loss statements for the last 6 months. The attorney will need that information to understand your income from the business and its value. If it is a partnership, then you own half of everything and are responsible for half of all of the debts, which must be listed in your petition. If it is an LLC or a corporation, then only those debts that you personally responsible for must be listed.
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[This communication is intended as general information and not specific legal advice, and this communication does not create an attorney-client relationship.]
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Your interest in the partnership is clearly an asset of the bankruptcy estate and must be disclosed. Its value, however, would need to be ascertained. In your case, it is likely that the value is minimal. If there is value, however, the bankruptcy trustee could ask your partner to buy out your interest. Consult an attorney.