If you were running the business as a sole proprietorship, it is my understanding that you have far less protection than if the business had been a partnership (i.e., LLP – Limited Liability Partnership, which is a legal entity for two or more individuals who own a business) or a corporation (i.e., LLC – Limited Liability Corporation, or, what my sister and her husband have as RE brokers, which are “personal corporations”).

If you didn’t incorporate the business and just had a business license and a DBA (known as “doing business as” documentation for the name of your business). As a sole proprietor, then you are and would be responsible for all of the debts, including the credit cards. As a sole proprietor, the credit cards are based upon your personal credit worthiness and score. For a corporation, credit cards and other forms of funding are being provided to what is often an unknown business entity with little or no history, capital or funding.

For a small business structured as a sole proprietor, credit cards offer great benefits – fast capitol for office equipment and paying for the occasional business lunch. Credit cards issued in the business’s name provide a separate account so business and personal accounts and finances are independent, making it easier to determine the business’s financial stability, forecasting P&L, tracking revenue and expenses, and, most importantly, preventing the comingling of personal and business monies come tax time or later if the business owner should be audited.

I know you probably know all of this, but for those who are following your blog and are unfamiliar with how businesses are legally structured and how responsibility for business debts is determined, I hope this is helpful.

So, how was your business previously structured prior to the BK. And, when this is all said and done, will you reorganize the business’ legal structure and if so, how? What has your attorney and accountant advised?