Legal Question in Bankruptcy in Maryland
LLC bankruptcy
A year and a half ago the other member of my LLC left town and the LLC stopped functioning. Recently a local vendor has received a financial judgement against the LLC. Because of this I believe the LLC should file for bankruptcy.
I've heard this is a simple matter of filling out the correct forms at the local courthouse, but I've never done anything like this before. Is this process too complex to do myself?
What is my personal liability?
Thank you.
2 Answers from Attorneys
Re: LLC bankruptcy
It may not be necessary for the L.L.C. to file a bankruptcy. If the L.L.C. owned/owns no assets, such as equipment, accounts receivable, etc., sometimes it is possible to make a creditor go away by demonstrating the L.L.C. has no assets and it would be fruitless to try to collect. If the L.L.C. has lots of creditors, or if this particular creditor won't go away, a bankruptcy filing might be necessary. Absent any fraud issues, there is no reason why you should be personally liable. Did that creditor sue you individually, as well as suing the L.L.C.? I cannot advise you whether or not you need a lawyer - filing a bankruptcy is more than filling out forms . . . but I can only tell you that if you need one, I am available.
Re: LLC bankruptcy
Carolyn is correct. Usually an entity that protects its owners from liability for the entity's debts doesn't bother with a bankruptcy -- it just fades away. The entity isn't entitled to a discharge under the Bankruptcy Code anyway.
In addition to the debt collection issues, there are tax issues to be considered. Even though the entity seems to have ground to a halt, it needs to file tax returns, and the tax consequences of its business operations (and its ultimate demise) need to be reflected on your tax return.
This is not easy stuff. Please follow Carolyn's suggestion and find qualified creditor rights and tax help.
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