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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 38801
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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My husband and I own a consignment shop in Augusta, GA. We

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My husband and I own a consignment shop in Augusta, GA. We established it in October of last year as an LLC. We have subsequently moved to Florida and left the shop in the hands of family. At this point we are having to subsidize the shop out of our own pockets every month. Our lease on the building runs out October 31 of this year, but we also have contracts with a security company and with a credit card company which I believe have another 3 years to go.

We are seriously considering closing the doors right now to avoid having to continue to pour money into a losing operation. What are the consequences of just abandoning it? Would we better off declaring the business bankrupt? What would be the cost of this and what would we have to do to declare it bankrupt? Would bankruptcy free us from the lease and the two contracts?

Thanks for any help you can provide.
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 5 years ago.
We are seriously considering closing the doors right now to avoid having to continue to pour money into a losing operation. What are the consequences of just abandoning it? Would we better off declaring the business bankrupt? What would be the cost of this and what would we have to do to declare it bankrupt? Would bankruptcy free us from the lease and the two contracts?

A: If you personally guaranteed/accepted liability for your lease, and/or any other contracts, then neither closing the doors nor filing bankruptcy on the LLC will prevent your creditors from attempting to collect from you personally. Only a personal joint bankruptcy by you and your spouse would accomplish a complete discharge of liability.

Since most vendors will not give a contract to a small-business LLC without a personal guarantee of the owner, I suspect that you will not be able to escape any of these debts, without a personal bankruptcy -- which may not be something you can accomplish, dependent upon your entire financial picture.

Conversely, if you were able to avoid personal liability on all of your debts, then you could simply close the doors on the business, leave the LLC in place, though dormant, and your creditors would have no recourse against you.

Hope this helps.

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