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Can I file bankruptcy as CEO without my partner's approval?

Can I file bankruptcy as CEO without my partner's approval?

Q: Do I lose my business if I file for bankruptcy?

Filing for bankruptcy does not automatically mean you will lose your business. In Chapter 7 bankruptcy, the business may be liquidated, while Chapter 11 allows for reorganization. The outcome depends on the type of bankruptcy filed and the corporation's financial situation. Consult a legal expert for tailored advice.

Q: Does the owner of a corporation have to pay back all debts?

Generally, the owners of a corporation are not personally liable for corporate debts. However, if you personally guaranteed any debts or if the corporation was involved in fraudulent activities, you may be required to repay those debts. It's advisable to seek legal advice for your specific situation.

Q: Is an S Corp owner liable for debt?

S Corporation owners typically are not personally liable for the corporation's debts, as the business is a separate legal entity. However, personal liability can arise if you personally guaranteed loans or if there was misconduct. Always consult a legal professional for personalized advice.

Q: How much do you have to be in debt to file Chapter 7 California?

In California, there is no specific minimum debt requirement to file for Chapter 7 bankruptcy. However, you must pass the means test, which evaluates your income against the state's median income. If your income is below the median, you may qualify for Chapter 7. Consult a bankruptcy attorney for guidance.

Full question:

I have a California S corp that is currently $750,000 in debt. I have a partner and 50% shares. I am CEO and want to file bankruptcy because all the loans have been called due immediately. We have no corp assets and no money. The building (partner owns) is going into foreclosure (doors have been closed since last July). Can I file bankruptcy as the CEO without my partner's approval? He wants to try to continue the business and I don't because we don't have any access to any more working capital. My partner (50% shares) does not want to file Chapter 7 bankruptcy. I have filed personal bankruptcy Ch 7. as the loans required personal guarantee. Can I resign as CEO before the partner can rack up more interest charges, penalties etc. If so, what do I do with my 50% stock, as he may not want it because he wants me to stay with the company that is a sinking ship.

Category: Corporations
Subcategory: Corporate Dissolution
Date: 04/07/2025
State: California

Answer:

Generally, the bylaws of a corporation dictate the actions of its officers and shareholders. These bylaws serve as a contract among members and outline the rules for corporate governance, including the roles of directors and officers, and the procedures for meetings and decision-making.

As the CEO, you have the authority to act on behalf of the corporation, but your ability to file for bankruptcy without your partner's approval may depend on the corporate bylaws and any shareholder agreements in place. Typically, a majority of shareholders must approve significant corporate actions, which may include filing for bankruptcy.

If you decide to resign as CEO, you can do so, but be aware that your resignation does not eliminate any contractual obligations the corporation has incurred during your tenure. Regarding your 50% shares, your partner's willingness to accept or buy them back may depend on their plans for the business. If the business is failing, your partner may not want to take on additional shares.

For specific legal advice tailored to your situation, consulting with a legal professional is recommended.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

Am I personally liable for S Corp debt?

As a general rule, shareholders of an S Corporation are not personally liable for the corporation's debts. However, if you provided personal guarantees for loans or engaged in wrongful conduct, you may be held personally responsible. It's important to review any agreements and consult a legal professional for specific guidance.

Do I lose my business if I file for bankruptcy?

What is the 2 year rule for bankruptcy?

The two-year rule in bankruptcy refers to the period during which certain transfers of property can be scrutinized by the bankruptcy court. If you transferred assets to avoid creditors within two years before filing, those transfers may be reversed. This rule aims to prevent fraudulent transfers. Always consult with a legal professional for specifics.